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FSA fines IFA firm £21,000 for pension switching failings

The FSA has today fined Gateshead-based IFA firm, N-Hanced, £21,000 for exposing their customers to the risk of receiving poor advice about switching their pension.

The FSA found that the firm had not recorded sufficient information about customers to demonstrate that its advisers had identified clients’ needs and reflected them in any recommendations they made.

N-Hanced also failed to adequately monitor the quality of its pension switching advice and record relevant management information on its pension switching business. Without these systems, the firm would not have been able to monitor its sales process or identify and address problems.

In a review of ten of the firm’s pension switching files, the FSA investigation found three files did not contain a fact find and of the five files that did contain a fact find, all five recorded insufficient personal information.

Three files did not contain an adequate explanation or comparison of the charges between the existing scheme and the new scheme. In one of those files, the fees in the new scheme were higher than the existing one, but there was no explanation to justify the client switching to a scheme with higher fees.

Six files contained insufficient information to establish how the clients’ attitude to risk had been reached, in three files the suitability letters were not adequately tailored to the individual client and two files contained a suitability letter that had been reviewed by the firm’s external compliance consultants and found to have “significant omissions”.

N-Hanced qualified for a 30 per cent reduction in penalty because it co-operated with the FSA investigation and agreed to settle at an early stage. Were it not for this discount, the FSA would have imposed a fine of £30,000.

FSA director of the enforcement and financial crime division Margaret Cole says: “When customers seek out advice about pension switching, they deserve to have advice which is tailored to their needs. After all, that is what the customer is paying for.

“N-Hanced collected so little information about its clients that it could not demonstrate to the FSA that any advice it had given to clients was appropriate to their specific needs.

“Pension switching is a complex area, and firms engaged in this type of business should be aware that N-Hanced is the fourth enforcement action following the FSA’s review of this sector.”

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Comments

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

  1. Incompetent Regulators Awards Team 8th July 2010 at 1:05 pm

    What do FSA staff know about pensions anyway?

  2. “In a review of ten of the firm’s pension switching files, the FSA investigation found three files did not contain a fact find and of the five files that did contain a fact find, all five recorded insufficient personal information.”

    Oviously the FSA work on a net basis?

  3. Of course we have only heard the FSA’s side of the story. But if true it’s very worrying that some IFA’s are so poor.
    I recently had some clients come to see me in desperate straits regarding their pensions. One been advised to transfer her pension on an execution only basis, her partner had been advised to transfer despite the charges being higher with the new scheme. Amazingly in both cases the whole of both funds was invested in property. They had both lost around 50%.
    The clients complained to the IFA company who turned them down. Sadly as it was over 6 months since they were turned down, the ombudsman was unable to help. He did recommend they report the firm to the FSA, which they have done.

  4. I’m off to B&Q to see if I can get 30% discount on a new lawn mower.
    I’m going to co-operate with the sales person so it should be a done deal!
    I’ll let you know how I get on.

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