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FSA fines two firms £143,500 for pension switching failings

Margaret Cole

The FSA has fined two firms, Perspective Financial Management and Cricket Hill Financial Planning, a total of £143,500 for failing to check the suitability of the pension switching advice they gave their clients.

PFM, based in Milton Keynes, was fined £49,000. It was bought by consolidation vehicle Perspective Financial Group in April 2008 and the FSA says the misconduct took place prior to the group’s acquisition of PFM.

Barnsley-based Cricket Hill was fined £70,000.The firm’s director Jeremy Sheard was fined an additional £24,500 and the FSA issued the compliance director Mark Kelsey with a public censure.

The FSA says Cricket Hill had “significant problems” with its advice and sales processes.

Its advisers routinely recommended that customers switch their pensions to a pension fund risk management service, without sufficiently researching alternative products.

The FSA says the firm could not demonstrate the suitability of this advice, particularly as most of its customers were not financially sophisticated and had small pension pots.

Cricket Hill and Sheard also failed to identify and manage conflicts of interest adequately. Sheard owned shares in the risk management service which his firm was advising most customers to use. This was not disclosed.

However the regulator says no payments, or dividends to shareholders, were made by the risk management service firm to Cricket Hill or its directors and employees.

The FSA says PFM failed to adequately monitor its pension switching advice and did not collect or record details of customers’ existing pension plan, needs and objectives.

The regulator says it found evidence of unsuitable pension advice in five out of the nine cases it reviewed.

PFM made unsuitable recommendations to customers to switch when the new pension was almost identical to their existing scheme, meaning customers incurred unnecessary costs.

The investigation also revealed that customers could not make informed decisions about whether to switch pensions as PFM provided inadequate information on the cost of services associated with the new pension, such as discretionary fund management.

The FSA found PFM also failed to put in place any system or procedure to ensure it only recommended unregulated collective investment schemes to customers who met specific, statutory, exemptions such as customers who were high net worth or sophisticated investors.

FSA enforcement and financial crime division managing director Margaret Cole (pictured) says: “Pension switching is a complex area and any adviser recommending a change of provider must be able to demonstrate that this advice is suitable.

“Firms that fail to do this put customers at risk of being worse off due to exit penalties applied to their existing pension and higher charges on the new pension.”

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Comments

There are 17 comments at the moment, we would love to hear your opinion too.

  1. What can I say? The bullys strike again. It would be interesting to learn Cricket Hill and Perspective’s side of the story. I bet the FSA inspectors know nothing about pension switches and probably know about light switches.

  2. If you guys haven’t got the trick that, whatever you think of the regulator, if you cannot evidence the affordability and suitability of your advice you deserve to be lightswitch salesmen and not professional financial advisers.

    I am so glad that I am not one of your clients p*ssed off IFA I dread to think what I’d find if I looked in your client files.

  3. P*ssed off IFA – read the article again and let us know what could possibly justify ANY of the actions described. I’m no fan of the FSA but the fact of the matter is that there are still IFA’s in the industry giving us all a bad name and they need weeding out.

  4. I would total agree witht the comment from voice of reason.

    The regulator is not only there to protect the customer but also IFA’s that choose to do the job correctly. Maybe people should think before they write as my opinion the firms above deserved what they got.

    Doing pension transfers that benefit the adviser and have no or little benefit for the consumer is not on

  5. Another good argument against RDR but FOR auditing self regulated firms.

    Simply check the quality of the work, as others have said if the content of the above is true this would never have complied with any pension transfers, never mind the latest standards.

  6. Do a "Hargreaves Lansdown" 16th February 2011 at 12:48 pm

    Hargreaves Landown have the solution, its callled and “execution only advised sale”.

    Yes pension switching is always a regulatory focus and only an idiot (or Hargreaves Lansdown)conducts business in this area without due diligence. Having said that could I ask the FSA how Hargreaves Lansdown get away with millions of pounds worth of “execution only” transfers into their SIPP without a jot of analysis.

    Yes sure go pick on a small firm for getting it wrong but leave HL well alone! HL claim they don’t give advice but in reality the advice is contained on their website and their newsletter.

    The FSA thought police should start to think otherwise why are we all jumping through advice hoops to get it right when all the time HL have a solution. Let me give you just one example of how HL cock a snoot at the FSA. This was just cut and pasted from their website:

    “Mr Robb from Hertfordshire transferred his pensions to the HL Vantage SIPP to have more control and choose investments with better potential.”

    So maybe we should all set up an “execution only website” and direct all transfer business that way – who needs an FSA fine?

  7. P*issed Off (thick) IFA – you just highlight why the RDR must be enforced and why the industry needs to rid people like you.

    You are simply an insult to this profession.
    Welcome 2013 and good riddance.

  8. I did not realise there were so many turkeys in the industry just waiting for the FSA to pounce and take their hard earned cash. There are 2 sides to every story and it would be interesting to hear from Perspective and Cricket Hill because at present the FSA are too quick to move and fine.

  9. But no matter what Mr P O IFA the article says that they could not evidence, the advice may have been good, but they could not evidence it!
    There own fault…

  10. Fraser Brydon - IFA 16th February 2011 at 2:44 pm

    The adage “if it’s not written down then it did not happen” is oh so true, no evidence then there was none – simples….
    We’ve all had enough warning!

  11. Fellas, I think you should all get proper jobs! and leave financial planning to the “not-yet-pissed off” IFA’s. That way, you earn half of what “N-P-O” IFAs earn and you have all the time to devout earning loads of money. I did! It works. Get out of the rat-packs race.

  12. Does the insurance company or SIPP provider carry no liability for this under TCF. They must have seen a pattern of small, single transaction pension transfers? The adviser certainly appears a little negligent but surely so is the provider?

  13. P**sed off IFA – Yes, there are 2 sides to the story, but we all know that the FSA do not just fine organisations and individuals “willy-nilly”. There would have been a long period of dialogue before any fine was levied, and before any public censures/announcements were made by the FSA.

    This firm, if they had done nothing wrong, would have had plenty of time to convince the FSA of this. I agree with the majority so far, that the FSA is correct to come down on firms who are letting the industry down, and, more importantly, ripping off vulnarable consumers.

    Furthermore, the more the FSA fines the rogues in this industry, the lower the costs of regulation will be for the vast majority of IFAs, who do a good job!!.

  14. If you look at the FSA register, and search for the firms, you can read more details about the reasons for the fines, such as switching to almost identical products and so causing the clients to incur excessive costs; exposing clients to higher risks than they were prepared to take; lack of justification for recommending UCIS; breaches of FSA rules.

  15. Tony | 16 Feb 2011 3:16 pm

    Providers cannot be responsible for the advice of IFA’s.

    I (working for a SIPP Provider) have challenged this before when I have seen small transfers in and / or very large remuneration payments paid to the IFA (sometimes as high as 15%) but I have been told that there is nothing that we can do about it.

  16. See the FSA do get praise and support when they are correct.

    If they thought before every move they could become the IFA champion.

    Sort the RDR.

  17. So how come the FSA allows a certain well known website to conducts execution only SIPP business and encourages transfer business by the millions into its SIPP. My earlier questions were not allowed perhaps because I named the provider so here goes my second attempt with the name removed!

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