The number of casualties from the regulator’s action on defined benefit transfers has started to stack up.
Last week it emerged Financial Services Midhurst entered a voluntary agreement with the FCA to cease its pension transfer business.
It represents the fourth firm to have acknowledged the impact of the FCA’s review on their business, the others being Intelligent Pensions, Welsh IFA firm Strategic Wealth and Selectapension.
Selectapension is one of the biggest names in the market, and represents a microcosm of the risks the FCA sees in the market.
A note sent to some Selectapension clients seen by Money Marketing last week says the FCA’s work focuses not on Selectapension itself, but on its outsourced partner, CFPML.
Selectapension says the FCA action “is not connected in any way with Selectapension and does not affect any of our online services, including defined benefit transfer value analysis and the report only service, where we continue business as usual.”
But action against CFPML means Selectapension cannot actually execute any advice for the moment.
So the key question is: who is CFPML?
CFPML’s Unbiased entry lists the firm as a “small independent company offering truly personalised financial planning from highly qualified planners.”
CFPML has offices across the road from Selectapension in Crowborough.
Two of the directors at CFPML, Toni Fox-Bryant and David Price, are also directors at Selectapension Bureau Services – a subsidiary of Selectapension – and hold minority stakes in the Selectapension Bureau Services.
Selectapension Bureau Services is structured as an appointed representative of CFPML.
Most importantly, CFPML is the link in the chain that holds the permissions to carry out advice, and operates on a whole of market basis.
Selectapension national accounts director Peter Bradshaw says while CFPML would “take into account” what the introducing adviser wanted, and would “take direction” from them, essentially, CFPML decides where the money ends up going.
Last August, the FCA warned “many authorised firms we have visited do not have adequate input or control over the advice they are ultimately responsible for giving to customers”.
Though that alert was targeted at arrangements between advisers and introducers, the same could be said of any relationship where advisers have little influence over where their client’s money ultimately ends up.
It has also been clear the firm advising has to take into account the assets in which the client’s funds will be invested and the specific receiving scheme.
But Bradshaw maintains advisers have sufficient control of the eventual advice. He says: “There’s a tracker within the Bureau for the introducing adviser so they can know where the case is, they get a copy of the report, they are informed along the way. They are not handing it over and becoming not involved at all.”
The regulator said in November 2015: “The adviser remains responsible for all decisions, actions and potential harm resulting from regulated activities provided in their name and the associated liability for providing unsuitable advice.”
That means CFPML remain on the hook if anything goes wrong with Selectapension’s components.
CFPML declined to comment.
The FCA’s fight
Another key question is where the FCA goes from here?
Money Marketing understands the FCA has identified 10 firms that have seen a spike in DB transfer business.
For some, the involvement of unauthorised firms was a concern, but others have proved that they can run a suitable model even with the involvement of an unregulated firm, from TVAS services to introducers or others.
While not all of them had requirements placed on them, that still leaves the possibility of a few more to come.
Some form of report on the DB transfer market is expected in the coming months, Money Marketing understands. We wait very keenly for the final breakdown.
Justin Cash is news editor at Money Marketing