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FSA fines IFA director £49,000 for pension switching failings

The FSA has fined Charles Palmer, director of Gloucestershire based IFA network, Financial Ltd, £49,000 for management failings which resulted in poor compliance monitoring on pension switching advice during a period of rapid expansion.

Palmer’s firm also owns IFA TV and Palmer himself (pictured) regularly presents videos on the website. One of the firm’s videos, which does not feature Palmer himself, asks where the FSA is heading next with its pension switching visits (see clip 1 below), while a second video talks in details about the FSA’s crackdown on pension switching advice (see clip 2 below).

Financial Ltd has agreed to carry out a past business review, which may lead to customer redress if it is found that unsuitable advice was given.

During its investigation, the FSA found shortcomings in the way the firm organised its business and how responsibility for monitoring advisers was allocated to senior management. In turn, this led to concerns about the monitoring of the quality of pension switching advice given by advisers between April 2006 and August 2008.

The FSA found that Palmer failed to establish and maintain a clear and appropriate reporting structure to ensure senior management understood and carried out their responsibilities for monitoring the network’s advisers.

It also found he failed to ensure the firm complied with rules and requirements to ensure that pension switching advice was demonstrably suitable and ensure that the firm recruited sufficient and adequate compliance and support staff during a period rapid expansion of the firm’s network of advisers.

FSA’s director of enforcement and financial crime Margaret Cole says: “This is the second enforcement action we have taken following the FSA’s review of pension switching advice. As the director of the firm, Palmer was personally accountable for failing to take the steps needed to manage the risk of advisers giving potentially unsuitable advice during a period when the IFA network was expanding so rapidly.

“As we have demonstrated with this case, and the Tenon example last week, we are following up on our promise to take action against firms who are failing to offer customers suitable pension switching advice.”

Because Palmer co-operated fully with the FSA and agreed to settle at an early stage of the FSA’s investigation, he qualified for a 30% reduction in penalty. Were it not for this discount, the FSA would have imposed a financial penalty of £70,000.

https://www.youtube.com/watch?v=1lbaStK3A2k

https://www.youtube.com/watch?v=sWvlE2k89TM

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Comments

There are 24 comments at the moment, we would love to hear your opinion too.

  1. I looked at Financial some years ago. Their fees were very low compared to most other networks. Perhaps this explains the lack of rigour in the reporting?

  2. You couldn`t make it up could you? Priceless. Does anyone remember Roger Levitt and the disappearing funds, circa 40 million I think, and his brief got him off with 200 hours community service? Has anyone got his brief`s telephone number? Could be useful

  3. None of the banks would have had the same failings. Many other IFA firms would…..
    No firm is whiter than white but why do IFAs feel the need to claim they are?

  4. Lindsay Lockett 3rd March 2010 at 11:45 am

    I am a member of the Financial Network and can report that robust systems are now in place to deal with pension switches since 2008.

    I suspect that with the benefit of hindsight the FSA can find fault with the majority of past pension switching advice.

    I use Financial as there fees are very competitive, maybe they did growth too quickly, but that doesn’t excuse the member IFA from cutting corners, shame Charlie was fined. But was probably an easy target for the FSA.

  5. The number of people I have tried to recruit to my company that didn’t because these were ‘cheaper’ must now relaise that cheap doesn’t mean best and certainly not safest and secure for the future. When will they learn that simple fact?

  6. I was until recently a member of the Network and can confirm that their compliance monitoring was very thorough and carried out very efficiently in my case.

  7. I imagine a few of Charlie’s counterparts at other networks may well be rushing for the white room and hoping they get there in time.

    With the benefit of hindsight testing, the FSA can basically find any faults it wants with any area of business, regardless of whether or not it [the FSA] provided the industry with any sort of regulatory guidance in advance.

    It’s a bit like being prosecuted for having driven the wrong way up a one way street before it was actually made one way. Only hugely worse.

    And rather a lot like being regulated by the Gestapo.

  8. Let me tell you that the quality of communications from this group is 1st class. I am not a member because Networks don’t suit me but I suspect strongly that Charlie Palmers robust stance against the insanity of the FSA has more to do with this fine than any shortfalls in their regulatory standards.

    What’s more having been hit like this it is likely that their standards will be even more robust.

    The Lord’s Prayer has 66 words.
    The Ten Commandments have 179 words.
    The Gettysburg Address is just 286 words.
    The small FSA handbook 400,000 words
    The FSA handbook has approx 4,000,000 words.

    OK, so I didn’t count the words in the FSA handbook but I reckon 400 words per page is a good average. The FSA have designed the rules so you will always be deemed to fail so this is no cause to stand on the side and say I told you so.

  9. When they charge so little how can you expect them to have any resonable sstems and controls

  10. Nice to see there is support for the Network from its members… As a member of another Network, I can assure you that expensive doesn’t mean best either…. see you on the 25th.. 🙂

  11. It’s the FSA doing their Stasi bit again and simply shooting people they cannot terrorise.

  12. I went to a meeting/workshop with the FSA early 2005 They said interpret the rules as you see fit as any 2 compliance officers for the fsa may interpret the rules differently to each other. HBOS were told the same and look what happened to them. Have HBOS been fined? Will HBOS be fined I doubt it. The FSA did not provide any guidance or direction in the first instance. Every small directly authorised firm should be worried about their tough stance now

  13. Charlie Palmer is a man who has a very thorough understanding of the industry and a man of integrity, in my opinion. Hence, he is an outspoken critic of the FSA, which is why he was fined, again in my opinion. There is nothing in the FSA statement explaining the nature of his failings to indicate that any clients have actually been given bad pension switching advice by the network advisers. I guess he was just “unlucky” that the FSA picked him to make an example of…
    Big bullies…

  14. Whether cheap/not cheap or robust/not robust the problems that will now arise will be the run on the PI insurance.

    It’s known that there has been a lot of pension switching and I suspect that a good many of the files may fail to meet acceptable standards.

    With the large transfer values involved it may not be long before the PI limit would be reached.

    A question that needs answering is what is the size of the policy excess – NOT the member quoted excess – the ACTUAL excess?

    If Financial Ltd have to take some hit on each complaint (stress may) then that’s a big hit on the finances.

    Does anyone know excess details?

  15. I am a network member of Financial Ltd and have been for the better part of five years; I was a member of a far more expensive network before that.

    I can assure you that the compliance and monitoring is far more comprehensive and robust with Financial than it ever was with the more expensive network; more expensive isn’t always better…..

  16. I looked at joining the Financial Network about 6 months ago and made the decision that cheapest is not always best looks like I made the right decision

  17. All IFA’s should be under no illusion that the FSA is getting heavy over pension switching. Their stance is that this is a similar review to the previous pension review in all but name. The reason for the low profile nature so far is that they do not want to generate publicity which will further undermine consumer confidence.

    If I was an IFA and had been involved in pension switching I would be going through every such file and making sure that every i is dotted and every t is crossed. To not do this know, could prove to be costly in the future.

  18. I have been a Financial member for several years. In the past I have been with other networks including Sesame, formerly DBS. My experience has shown that Charlie and Financial have always endeavoured to treat me with with fairness and integrity. The rapid expansion has been because they provide a far better service than other networks for a fixed cost, not always the cheapest. They may well have taken their eye off the 8 ball, but show me any network that under FULL scrutinisation of 1000s of file checks would not escape a fine?

  19. i joined financial 2 years ago and can only say it was the best move i made in 14 years.the support i have received in all areas have far excelled what i expected for my network fee.my compliance visits are comprehensive,files checked regularly and general approachful support. previously i was paying a large fee per month for less support. now i am getting value for money.well done charlie and the team. maybe others dont like to hear the truth!

  20. In the final notice to Financial, the fsa acknowledges that no consumer detriment was evidenced throughout this investigation.
    In effect the fsa have fined financial for a lack of systems and controls.Makes you wish the fsa were accountable to someone, anyone, for their regulatory failures.

  21. The rule with many Networks is take as much as you can get and offer as little as you can offer. I suspect we have a few Network Officials on here, unable to complete on cost or service with Financial but now they see the chance to have a go.

    Listen the FSA are not prescriptive – what this means is they tell you you are wrong after the event. Financial have stood up for IFA rights when most if not all other Networks have acted in a cowardly fashion for fear of a knock on their door by this dictatorial regulator!

    Now its time to support Financial and I’m not even a member!

  22. This is pure FSA rent collection and nothing more than a parking fine!

    By the way where does the fine end up – FSA hotel expense accounts, retirement bash on HMS Belfast, £500 taxi fare home, an addition the their fine arts collection or maybe into their fat cat final salary pension scheme (run so well its now in deficit).

  23. Systems and Controls are just as good at Financial as anywhere else. I can say this an AR for the past 7 years.

    Anyone ‘kicking’ Charlie Palmer (and effectively supporting the FSA action) is naive to say the least. Those individual’s shouldn’t be surprised if the FSA hands them a fine when it comes knocking on their door !

    The FSA is dictatorial and incompetent – it has not identified any consumer detriment but there were a few boxes left unticked (according to their bureaucratic civil-service mentality).

    The FSA’s job is to help IFAs, not to put them out of business. They should have simply pointed out any shortcomings and requested that the firm improve (where thought necessary) in the future. Instead, they thought it reasonable to take revenge on one of the few individuals who has been prepared to ‘put his head above the parapet’ in castigating the FSA for its own shortcomings. As with every government department, the FSA is keen to mete out penalties for other people’s failings but never recognises (let alone gets penalised) for its own woeful performance.

    If we are looking for one organization that has caused massive consumer detriment, one only has to look at the FSA.

  24. We have been members of Financial since 2008 and have found them to be both extremely thorough and fair with their Compliance procedures.

    It really is a shame that once again the FSA have seen fit to pick on the “IFA” whilst allowing the nationalised banks to operate with impunity!

    It really is rather pathetic and hopefully doesn’t take the Tories long to rid us of this pathetically weak regulator!!

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