FCA’s DB transfer work widened amid outsourcing concerns

The FCA will broaden its work on defined benefit transfers as it highlights particular concern with “commoditised, industrialised” processes between advisers and specialist transfer firms.

Speaking at the Personal Investment Management and Financial Advice conference in London today, FCA supervision, investment wholesale and specialists division executive 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.

Butler said: “In particular, some firms that had seen significant growth in their pension transfer business had defaulted to a commoditised, industrialised process – an outsourced process perhaps – not focused on a client’s individual needs.”

She said the regulator will widen its work on DB to defined contribution transfers, taking what it has done with a “relatively small population” and move to the next group of firms who are active in that space.

She said: “We are also actively considering what more we can do across the broader population.”

‘Rigorous’ DB transfer redress calculation welcomed

Butler reminded delegates of the findings of the regulator’s work so far on DB transfers. Over the past two years the FCA has had detailed information requests from 22 firms on their DB transfer business.

Following the analysis of that information, it reviewed a sample of case files for 13 firms and visited 12. AS a result of the regulator’s assessments, four firms decided to stop advising on DB transfers.

In the advice space, as well as DB transfers, Butler said the FCA is most interested in high-risk investments. In particular, it is interested in unregulated introducer firms and the risk of scams faced by Sipp operators.

Ten issues with DB transfer files and how to solve them

However, she said she realises this work comes at a cost to advisers in terms of data requests, giving the example of an October request that was sent to 152 firms asking for detail of high-risk investments they have advised on.

Butler said: “I want to make it clear we do not dash off these data requests lightly. Quite the opposite. We are working hard to reduce the number of data gathering calls we do in this area and we have set up an internal information governance board to challenge and manage ad-hoc requests as well as to lift the burden on individual firms.”

She added: “We are employing increasingly sophisticated analytical models and designs so we can identify high-risk firms with less imposition on the broader population.”


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