The Financial Conduct Authority (FCA) should not treat advisers like children by maintaining the unsuitable transfer advice assumption, Richard Parkin told delegates at last week’s PA360 conference.
Speaking in a panel debate on the day, the Parkin Consulting pensions and retirement consultant (pictured) said the financial watchdog must not ‘treat advisers like children’ after it failed to anticipate situations such as the British Steel saga.
“Because of what happened with British Steel – anyone in this room could have looked at it and seen a huge amount of money flowing, a limited timeline to make a decision and, with other options not looking particularly attractive, it could only go one way – but the fact the FCA did not anticipate that could happen, I think, means it is having to respond in the way it is,” he said.
“But to treat advisers like children by telling them defined benefit [DB] advice isn’t suitable, or you’ve got to start from the point of unsuitability, isn’t a helpful way of regulating. Yes, the sector will always be judged by the bad apples in the barrel, but it is the FCA’s job to root out the bad apples, not to spoil the barrel.”
In March, a policy statement published by the regulator said its recent supervisory work had presented “significant evidence of unsuitable advice being provided” and, as such, it had abandoned plans to drop the unsuitable transfer assumption first proposed in a consultation last June.
In a separate investigation into advice given to British Steel workers, the regulator found suitable advice had been given in a little over half (51%) of cases.
A group of British Steel workers have since taken steps to begin legal proceedings against the firm that advised them, the now-liquidated Active Wealth UK, and others also involved in their pension transfers.
‘Huge proportion can benefit’
The panel, which was chaired by Technology & Technical managing director Kim North, and also featured CTC Software co-founder and managing director Nigel Chambers, and Technical Connection head of pension strategy Claire Trott, were at odds with the FCA, arguing DB transfers were suitable for a “significant” number of people.
“There are a very significant proportion of people in DB schemes who can benefit from a transfer,” said Chambers. “They might have sufficient funds elsewhere and want the flexibility – it might be they have so much DB that actually they can benefit from flexibility in the top half of it or something like that. I do think it is a very significant proportion of people who would like to take those freedoms up.”
Parkin said typically anyone who was sick or single or both could benefit but, since the pension freedoms, this had become more complicated.
“The reasons for transferring can be so varied – trying to balance our subjective decisions against objective financial analysis,” he said. “I think it is full of complication and risk for advisers, but I’m with Nigel – I think there’s a huge proportion of people who could be advised to transfer, and therefore I think it’s about making sure everyone gets the opportunity to make sure it’s right for them.”
Trott said she too agreed a “good, significant number” could benefit from transferring out before stressing ongoing financial advice was the key to a good DB transfer.
“There is absolutely no point in someone going to an adviser, seeing them on a one-off basis and never seeing them again,” she explained. “This is a lifetime transfer, it’s not just a point that something happens.”