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, which is 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 before 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 dir- ectors 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, mean- ing that 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.
FSA enforcement and financial crime division managing director Margaret Cole 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.” Perspective Financial Management managing director Tim Langman says: “Having assisted the FSA in its enquiries and undertaken a full internal review we are confident that any breaches in FSA rules were as a result of ineffective management procedures and were not as a result of deliberate misguidance.
“We accept responsibility for these breaches and have worked to ensure that there will be no repeat of these instances. Since acquisition by PFG, there have been significant changes to PFM’s organisational, governance and compliance arrangements to ensure that PFM is providing compliant and professional advice at all times.”