Advisers need to worker harder to put relevant client details in suitability reports or they risk failing to meet the FCA’s expectations on pension transfers, says consultant Rory Percival.
These included the introduction of a rule to require all advice on the conversion or transfer of safeguarded benefits to result in a personal recommendation.
The majority of the remaining changes, which cover the transfer value comparator and the appropriate pension transfer analysis, will come into force on 1 October 2018.
Speaking at the Great Pensions Debate event in Port Talbot today, Percival says some advisers are falling short of the FCA’s new requirements.
He has seen evidence of poor practice in client suitability reports and fact finds in the past two months.
Percival says advisers need to ask if there are alternative ways to fund a client’s needs without touching their pension.
This is partly to comply with the FCA’s regulations on transfers but also because it is aware of how advisers can manipulate client objectives by putting words in their mouths.
Therefore, the regulator wants to be able to see a “real person” in the suitability report to be sure a client’s needs have been considered.
Percival said: “I saw a file where someone had done a pension transfer to build a conservatory but they had enough money in the bank account to pay for it.
He says: “Another example I came across is somebody used their DB scheme to fund their children’s education but that could have been funded by borrowing money rather than giving up that guarantee of a final salary scheme. The FCA will ask: was the suitability report that facilitated this believable?”