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FSA says tied firms blocking switches

The FSA has slammed tied firms for failing to investigate customers’ existing pension arrangements, under its review into pension switching advice.

In an update on its probe, the FSA says four firms have been ordered to carry out costly section 166 reviews on past business as part of the pension switching advice review. Money Marketing understands one major retail bank is among the firms.

The FSA says it found evidence of tied firms preventing their advisers from investigating existing pension arrangements where the arrangements were outside the firm’s product range.

It says: “Irrespective of the adoption of a tied advice model, there is a duty on the firm to act in the best interests of the customer and to take steps to ensure a recommendation is suitable.”

Syndaxi Chartered Financial Planners managing director Robert Reid says: “This behaviour is not defensible. They are just trying to shoehorn customers into their product.”

Since its 2008 report on pension switching advice, the FSA has investigated 22 firms, of which two were retail banks, and found unsuitable advice was still being given in over a third of cases.

Director of conduct risk Dan Waters says: “We remain concerned that some firms continue to give poor advice. Ignorance is no defence and we will not hesitate to take tough action against any firms that fall below our standards.”

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. The regulators need to look at the regulations. The historical regulations and the problems associated with ‘tied’ or ‘restricted’ advice.

    Quite how they expect the RDR to provide better access and more choice for consumers by pushing advisers into ‘restricted’ or ‘tied’ advice models is a mystery to me, I doubt that I am alone in this point of view.

  2. The strange thing is, all of the tied advice switches I have seen have 3 common elements:

    – the recommendation was made on the basis of client insistence, based on a “unique” factor of the tied company’s product range.

    – the charges in the new arrangement have been higher than the old.

    – fund switches within the existing arrangment were not discussed and the tied basis of the adviser used as an excuse or “cover” for not doing so.

    These companies are using their tied status as an excuse not to carry out proper research.

    What exactly does the FSA expect when an adviser has just one product to sell?

  3. If tied agents are only allowed to discuss and recommend their own product range, how can they be expected to analyse and report on the products outside of that range in the client’s best interest?

    I would say its better for them to refuse to transact in areas that could get them in to trouble. This seems like a case where they are damned if they do and damned if they dont.

  4. There was nothing to stop the tied advisers reviewing existing arrangements. Stop putting the blame on the FSA by implying they allowed or encouraged this to happen. There are too many advisers (tied or otherwise) who simply do not do the job properly.

  5. ‘These companies are using their tied status as an excuse not to carry out proper research’

    FSA fines IFA Robin Bradford 24,500 for pension switching

  6. I agree completely with David Drane. Tied advisers are not authorised to advise on products other than those of their host company. If the FSA has concerns about the quality of pension fund switching advice provided by tied firms, then it needs to define the difference between “analysing and reporting” and providing advice. I don’t see how you can do one without the other because the acid question from the client has to be “So is my present plan worth staying with or is it inferior to the one offered by your company?” An answer to that has to constitute advice about what the client already has.

    It’s an impossible situation that can only be resolved by barring all tied agents and DSF’s from transacting this type of business.

    Sticky for the FSA though, because the banks wouldn’t like it and it would constitute another filip to the value of IF advice. Fudge, fudge, fudge ~ as usual.

  7. The regulators need to look at the regulations. The historical regulations and the problems associated with ‘tied’ or ‘restricted’ advice.

    Quite how they expect the RDR to provide better access and more choice for consumers by pushing advisers into ‘restricted’ or ‘tied’ advice models is a mystery to me, I doubt that I am alone in this point of view.

  8. I assume all these ‘pension experts’ have the qualifications precribed by the regulator. If so, what value is there in these ‘higher standards’? I have never, well hardly ever, met a suitable candidate for pension switching, drawdown, SIPPs, SSAS or many other areas.

    When will all the ‘misselling’ end?

  9. To Anonymous | 16 Apr 2010 12:04 pm who says “I have never, well hardly ever, met a suitable candidate for pension switching, drawdown, SIPPs, SSAS or many other areas.”

    You’ll really have to try to get out more then.

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