The Financial Conduct Authority (FCA) is to press ahead with its plan to require firms to provide suitability reports for advice against a pension transfer despite concerns over additional advice costs.
In its policy paper PS18/20, published on Thursday (4 October), the FCA confirmed plans to require firms to provide a suitability report during pension transfer advice, regardless of whether the recommendation is ultimately to transfer.
The FCA said a suitability report would provide a customer with a lasting record of why remaining in a defined benefit scheme was the most suitable outcome for them, as well as offering a record that should help an adviser if there was a future dispute on the advice given.
Some respondents to a prior consultation on the proposal suggested the additional requirement would significantly add to the cost of providing advice, which would ultimately be passed on to consumers. Some firms were concerned it could deter people from seeking advice, or make it unaffordable for others.
To this, the FCA said it accepted some additional costs may be passed on to consumers. The requirement will come into force from today.
‘Equally as important’
Informed Choice managing director Martin Bamford suggested forcing more work on some advisers, and possibly driving up the price of advice, could lead to a more professional pricing structure.
“Advice should not be limited to the sale of a product,” he said. “Producing a detailed suitability report is equally as important when providing advice not to take a particular course of action as it is when a positive recommendation for action is made.
“The sooner advisers realise the value of what they do is in the advice they deliver, and not in the products they recommend, the sooner consumers will become better educated around the cost and value of advice.”
He continued: “For advisers reliant on contingent charging, having to do more work in order to justify giving impartial advice might increase prices – but it could also result in a shift to a more professional charging structure where the same fee is charged regardless of the product outcome.”