Compliance provider threesixty has released a guide for adviser firms on how to respond to the Financial Conduct Authority’s (FCA) letter regarding pension transfer advice.
Last year, the FCA issued a survey to firms with full pension transfer permissions asking them to provide information on their business models, charges, compliance processes and sources of business from April 2015 to September 2018.
The financial watchdog published the results of the survey in June 2019, with director of supervision Megan Butler telling PA at the time “we will be closing down firms [as a result of the findings]”.
Following the results, the FCA visited firms it considered to be of higher risk or very active in the sector. It is now in the process of writing to other firms it deemed to not require an immediate FCA visit but viewed as a potential risk to clients because of aspects of their defined benefit (DB) process.
The seven key concerns outlined in the FCA’s letters related to the volume of transfers, the conversation rate, insistent clients, income from DB business, unauthorised introducers, transfers per pension transfer specialist and expensive solutions.
Since the letter, threesixty said it received hundreds of calls and emails in relation to the letters and has consequently written a guide for firms on how to respond should a firm receive the regulator’s letter.
The guide, which is available now, explored the FCA’s concerns and suggested points to consider when a firm drafts its response. It also included some tips to keep in mind and highlighted the pitfalls to avoid.
Threesixty compliance director Gary Crossley said in particular firms did not record their management information properly in the survey, especially where an actual or a pseudo triage had taken place, leading to a number of firms unintentionally misrepresenting their position when submitting their initial data to the FCA.
“Should you receive a letter, it’s important that you carefully consider your response and act promptly,” he said. “We’ve produced this guide to provide a steer on how best to approach your response, put your firm across in the best light and alleviate any concerns the FCA may have with your firm. To do this, it’s essential that you provide the regulator with the information they are looking for, and in the right context.”
Crossley said the ultimate goal of the response is to achieve closure with the FCA. However, it is likely many firms will need to consider taking remedial action.
He added: “Some firms are worried that any admission to the FCA and professional indemnity (PI) insurers gives a bad impression, but it’s important that they are entirely transparent with the regulator and their PI insurers. The FCA’s focus is on the potential for consumer harm, not necessarily poor record keeping at this point.”