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.”