Monday, 19 June 2017 12:04

FCA DB probe could involve up to 100 firms

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An FCA probe into DB pension transfer advice may involve 50-100 firms.

That was the estimate from the regulator’s ex-technical specialist Rory Percival today.

The FCA recently announced it will publish a consultation paper on DB to DC pension transfers in an update on the Financial Advice Market Review. Mr Percival said he expected this to be published on Wednesday.

He said this will involve “looking at a large number of firms in two stages”

He said: “I estimate 50-100 firms, which is a significant amount for them to be looking at for this type of work, and I think they are doing a first stage, asking for files.”

Mr Percival told Financial Planners that he feels it is “inconceivable” that the FCA will relax its existing DB transfer stance.

He cited a policy statement last year, which re-stated that the default requirement is that it is best to stay, not transfer. He believes this is likely to stay.

“With all of the work going in the regulator and all of the concerns in market it seems inconceivable to me that they will relax the position,” he said.

“Even from a political aspect, given the importance of the pensions freedoms and therefore not to be a mis-selling scandal, I don’t see them winding back on that requirement. Also, that thing about the Treasury leaning on the FCA, that’s not how it works anyway.”

The FCA is largely concerned about unsuitable advice, Mr Percival stressed, saying that bosses
“have seen and heard things they don’t like”.

He said: “it is concerned about are you operating it as a professional firm.

“Are you running your firm effectively? Are you considering the risks within your firm, to your firm and to your clients?

“And are you putting in appropriate systems and controls to mitigate those risks or mitigate the impact of those risks? It’s a much higher approach they will look at with a firm.”

He said it is about biases and conflicts of interest and how these are managed. He said everyone has these, because everyone is human and it happens subconsciously.

He said firms have to think about how their clients get the right outcome. He said individual circumstances are key.

He said: “You won’t get the regulator saying this but there’s potentially an element around it’s unusual circumstances, it’s particular circumstances, that merit a transfer.

“Now you may say that the high transfer values may be one of those particular circumstances
and we’ll hear that debate later but it clearly needs to be relevant for that particular client.”

He believes that one change the FCA might be considering is to expand the transfer analysis document to include the other options available - but to make it a non-client facing document. This would be part of the research and analysis process that the adviser goes through. The adviser will advise on the back of that and pick out the key points and relay those to the client in the suitability report, he suggested.

“To be honest that is the only way I can see that circle being squared but there are probably brighter brains at the FCA than me to come up with a solution,” he said.

The Defined Benefit pension transfer discussion day has been organised by adviser Al Rush, who runs Echelon Wealthcare and set up robo-adviser Fiver A Day.

Last modified on Monday, 19 June 2017 12:07
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