FCA data ‘does not reveal widespread advice issue’ – PFS

Sophie King reports...

The FCA’s latest pension transfer data does not reveal a “widespread issue” with financial advice, according to PFS boss Keith Richards, who has argued it “narrowly focused” on DB pension transfers.

The professional body’s chief executive (pictured) said the data released by the Financial Conduct Authority (FCA) last week on defined benefit (DB) transfers showed the watchdog was taking a “risk-based” approach to supervision.

He stressed it was “vital” to understand the FCA’s study was not representative of advice standards more broadly – and neither did it include or represent the activities of all regulated firms.

Richards’ comments came after the FCA said the results of its research made for “concerning and disappointing” reading. The regulator found firms were recommending large numbers of DB transfers, despite its stance that leaving a final salary pension scheme was likely to be unsuitable for most clients.

The Personal Finance Society (PFS) chief executive continued: “It is logical that the FCA will hone its focus on risk-based supervision, targeting businesses where there is volume activity and therefore the potential for greater risk to consumers if pension transfer advice processes are found wanting.

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“This study is therefore not representative of the wider financial advice community, many of whom don’t advise on defined benefit transfers, and those who do in the main may have only advised on a small number of cases to meet the needs of existing clients.

“It is important that reporting of failings is proportionate and does not misrepresent the majority or erode public trust more broadly.”

‘Don’t overreact’

Richards added it was equally important neither the profession nor professional indemnity insurers overreact to the data. He said there should not be an automatic belief there was a “widespread problem” with the defined benefit transfer advice being given by the entire financial advice profession.

Richards also pointed out that the government introduced pension freedom to allow people to do what they wanted, when they wanted.

“Chancellor George Osborne made it clear that ‘no-one ever has to buy an annuity again’,” he added. “What we need to see is the government, regulators and the profession working together in the wider public best interests.”