A system error in the Financial Conduct Authority’s marketwide survey on defined benefit (DB) transfers could have produced inaccurate results for some respondents, Professional Adviser can reveal.
PA can reveal the error could have affected around 320 of the advice firms who took part in the FCA’s survey. The issue with the survey centred on question 5d: “How many clients discussed a DB pension transfer with the firm but did not proceed to receiving advice?”
Guidance accompanying the question asked respondents to enter “0” in the appropriate box if they did not operate a triage process. Those who did not maintain records of clients with whom DB transfers were discussed but did not proceed to receive advice were advised to enter “no data”.
Professional Adviser understands, however, it was not possible to enter “no data” for the question in hand. When some firms tried to enter “no data”, the input box defaulted to “0”, giving the impression that firms without data on the subject did not turn away a single client who came to discuss DB transfer advice.
Professional Adviser has seen correspondence between an adviser who raised concerns about the question and the FCA. In the correspondence, the FCA acknowledged “less than” 20% of the 1,600 firms who received a follow-up letter after the survey reported a 100% conversion rate of clients recommended to transfer after receiving full advice. The regulator then admitted it was possible “some of the those” could be in a similar position, facing problems with question 5d.
One adviser, who preferred to remain anonymous, said they contacted the FCA and informed the regulator of the error, but were advised to continue with the survey regardless.
“When my firm received the feedback from the FCA, the computer system then assumed, because of the “0” in this box, we had advised 100% of our enquiries to transfer,” they explained. “The FCA feel the figure should be well below 50% and, as a result, we received a letter of reprimand and instructions to check all our transfer files. In reality, we converted a very small proportion of the enquiries we received.”
The adviser continued: “[The FCA] has been going around saying, based on false information, that people in the transfer market are doing a terrible job. And so it’s not the case, necessarily.”
When the FCA revealed the results of the survey in June, it said the findings made for concerning and disappointing reading because firms were recommending large numbers of transfers. The survey found 69% of the 234,951 total pension scheme members seeking advice had been recommended to transfer.
Professional Adviser contacted the FCA to ask if the error could have skewed the survey results and its findings. In response, the watchdog said: “The survey was a starting point for our data gathering, and each firm has had the opportunity to explain its activities. As such there is no skew in the data analysis underpinning our ongoing work in this sector.”
Last Week, PA revealed an adviser 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 in response to this marketwide survey. The adviser – who preferred to remain anonymous – said the letter first outlined the FCA was contacting firms following its 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.
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.