FCA contacts adviser over firm’s ‘low’ number of DB transfers

Hannah Godfrey reoprts...

An adviser has received a letter from the Financial Conduct Authority (FCA) that suggested it was concerned the firm does not carry out enough defined benefit (DB) transfers.

The adviser – who preferred to remain anonymous – told Professional Adviser the letter first outlined the FCA was contacting firms following a data gathering exercise because it was concerned about the volume of DB transfers across the sector, only to point out it was concerned by the small number of transfers carried out by the firm in the next paragraph.

Since April 2015, the firm has carried out just five DB pension transfers. The adviser said each of those individuals were facing unique situations, several of which were existing clients who had fallen ill as they got older.

The adviser described the letter as “contradictory” having first expressed concern about the volume of transfers taking place, to then raise concerns about the firm’s small number of transfers. The letter suggested because of the low volume of transfers, there was a risk the firm did not hold or retain sufficient technical knowledge.

The letter then went on to express concern about the firm’s conversation rate, which stood at more than four-fifths of transfers. The adviser said it was purposeful that the conversion rate was high, explaining: “I don’t want to take on people who just want to get their DB transfer rubber-stamped.

“Most of these people are existing clients who have fallen ill. We don’t get referrals from anywhere other than our existing clients and we’re not on Vouched For. If you’ve got an existing client you’ve advised for 10 years and they’re falling into ill health and have a DB pension, it’s going to come up, you already know you’re going to do it.”

The adviser described the letter as “nonsense”, pointing out it was likely produced by a machine rather than a person, the content of which depended upon answers the firm gave in the FCA’s DB transfer survey last November.

“I don’t think [the FCA] is genuinely concerned about our business. When I got [the letter] I couldn’t believe it, but then I just thought the easiest thing to do would be to respond, and it would probably never come back up again,” they added. The adviser concerned is a pension transfer specialist who has been in the business for many years. They said they were not concerned about not having adequate technical knowledge.

The FCA has been contacted for comment.

Last November, the FCA sent a probing questionnaire to all adviser firms that held DB transfer permissions. It revealed the results of its survey in June this year, when it described itself as ‘concerned and disappointed’ by the findings from the data-gathering exercise.

The exercise found firms were recommending large numbers of DB transfers, despite the regulator’s stance that transfers are likely to be unsuitable for most clients.

Following the data reveal – and pulling no punches – FCA director of supervision Megan Butler told PA the regulator would be closing adviser firms down if they were not “ready, willing and able” to improve their pension transfer processes.