In a ‘Dear CEO’ letter sent to advisers today the regulator says it will focus on retirement advice and has raised new concerns about the volume of pension transfers and advice in this area.
Too much pension transfer advice is “not of an acceptable standard,” says the FCA.
The letter is part of its second review of the market for pensions and investment advice: ‘Assessing Suitability Review 2.’
In the letter, Debbie Gupta, FCA director of Life Insurance & Financial Advice Supervision, says the watchdog has “identified four key ways in which consumers of financial advice may be harmed.”
• receiving unsuitable advice for their needs and objectives
• falling victim to pension and investment scams
• not receiving redress as a result of the non-payment of FOS awards and/or failing firms being unable to compensate consumers
• paying excessive fees or charges for products and services
The FCA says its review will involve a ‘representative sample’, “to build a view of the retirement income advice market.”
It will also focus on how firms have implemented the new senior managers and certification regime (SM&CR).
The FCA will publish a report setting out the results of the review in 2020.
The Dear CEO letter says: “Consumers are being asked to take more responsibility for an increasing number of complex financial decisions. Financial advisers have a valuable role to play in helping consumers navigate these choices and deliver the right solutions for their needs and objectives.
“However, we are seeing an increasing number of cases where the actions of firms are resulting in significant harm to consumers’ financial well-being. Preventing harm in this portfolio is therefore a key priority.”
On DB pension transers she warns: “We have repeatedly made clear our expectations of financial advisers, as well as strengthening the rules around defined benefit (DB) pension transfer advice.
“Despite this, too much advice is still not of an acceptable standard. We also remain concerned firms are recommending large numbers of consumers transfer out of their DB pension schemes despite our stance that transfers are likely to be unsuitable for most clients.
“As a result, we will continue to focus on this area until the quality of pension transfer advice reaches the same standard as the wider advice market.”