FCA writes to advisers over ‘commoditised’ DB transfer processes

The FCA has issued a warning over ‘commoditised’ defined benefit pension transfers running the risk of unsuitable advice.

In a letter sent to advisers holding pension transfer permissions, the regulator reminds planners that a “key area” of its focus is on pension transfers, and that it will later this year be contacting all firms to collect data across the market, with any pension transfer advice potentially up for review.

It also expresses its concerns over volume processes for DB transfers.

The letter reads: “We are aware that firms offering a commoditised approach to pension transfer advice are more likely to give unsuitable advice or fail to recommend a suitable destination fund. By a commoditised approach, we mean an approach which does not entail a complete analysis of a client’s personal circumstances or needs and may include some generic assumptions in order to arrive at a personal recommendation.

“Commoditised business models do not adequately focus on the clients’ needs and personal circumstances and can result in a high incidence of unsuitable advice to transfer.”

The letter details five separate alerts or consultations the FCA has released on DB transfers since August 2016.

It also reminds advisers to be aware of its Conduct of Business Sourcebook rules around transfers, detailed in COBS 19.1, and its suitability rules more generally in COBS 9.

However, some advisers have expressed concern that talk of more reviews could further damage the reputation of the planning community.

An adviser tells Money Marketing: “Its tarring everyone with the same brush. If it is going to review the market, it should be those selling DB transfers rather than a block of professional advisers sitting back and, if clients come to them, decide on the right option.”

Speaking at the Personal Investment Management and Financial Advice Association conference in November last year, FCA supervision director Megan Butler said the root cause of a lot of the issues around DB transfers relates to the business model between the introducing firm and the specialist transfer firm.



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There are 4 comments at the moment, we would love to hear your opinion too.

  1. I must admit, I hold my head is disbelief that there is anyone left in this industry who thinks that this approach is ever going to be appropriate.

  2. I’ve been laughed at over this but how can a professional planner transact a transfer against its own advice. The ‘get a letter in a clients own handwriting’ show they are insistent clients is fundamentally wrong.

    Couple this with high T.Vs and a big element of herding and it’s a disaster waiting to happen.

  3. Although the FCA have had an invite to this (DB transfer debate)party, and yes they have voiced its arrival yet again we see they are woefully late in turning up !

    Lets face it CETV’s have been ultra high for some years now…. and this is the problem, as Adam Smith has pointed out some minority advisers will just see profit !

    The action the FCA talk about should have been done… what 5 years ago ? maybe longer ?

    How often do we read now, that problems arise on mass, BSPS, land banking, UCIS in a lot of cases very high volumes of business is put through a very low number of firms

    Again we have to question the RMAR/Gabriel reporting…. if its not going to flag up inconsistency in the industry, or high volumes of advice in one fund or one area, and firm risk, is it real worth the aggro twice a year ?

    Megan Butler may well announce, with much gusto, what indeed, is forefront in her mind ….. but one gets the feeling, she is looking down the entrance or exit of the tunnel when in fact the train is fast approaching from behind !

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