Rory Percival ‘surprised’ over latest FCA consumer harm warning

Claire Tyrrell writes...

Ex-Financial Conduct Authority (FCA) man Rory Percival was surprised the hear the regulator’s latest claim that cases of consumer harm in the advice process are increasing.

In a Dear CEO letter issued this morning (21 January), the FCA said the next stage of its suitability review would focus on retirement income and crackdown on increased consumer detriment linked to advice.

The regulator outlined its approach to tackling key areas of concern linked to adviser firms and actions advisers should take this year.

The FCA said it was “seeing a number of cases where the actions of firms are resulting in significant harm to consumers financial wellbeing”.

It highlighted pension transfers and investment scams as areas where consumers were being harmed, claiming authorised firms were continuing to work with unregulated introducers to carry out this work.

Percival, who now runs his own training and consultancy firm, said he was surprised to see these assertions included in the letter.

“It talks about seeing an increasing number of cases where consumers are facing harm. That surprised me. We know that’s been an issue with DB transfers but it seems because they are referring to these other areas they are seeing consumer harm other areas,” he said.

“They talk about authorised advisory firms getting involved with introductions from unauthorised firms in relation to unregulated business. I’m surprised there are advisers still doing that and shocked and disappointed but it’s clear that they are because the FCA would not have said that had that not been the reality of what they’re seeing.”

Percival also questioned the timing of the FCA’s correspondence, given there was no standout issue it was concerned with.

“It normally does Dear CEO letters where there are particular areas of concern. It was quite wide-ranging so I wonder why they’re doing it at all,” he added.

The FCA’s letter follows its Assessing Suitability Review in 2017, where it focused on non-pension accumulation, pension accumulation and decumulation.

Percival said by honing its focus on pension decumulation, the FCA should be able to generate its review in a faster timeframe.

“I suspect not doing non-pension accumulation and not doing pension accumulation, outside of DB transfers, will mean they can get it done quicker with fewer supervisors,” he said.

In its letter, the regulator reiterated its expectations around defined benefit (DB) transfers and said “too much advice is still not of an acceptable standard”.

The FCA said it remained concerned firms were “recommending large numbers of consumers transfer out of their DB pension schemes” despite its stance that transfers are unlikely to be suitable for most clients.

The regulator added it would continue its focus in this area “until the quality of pension transfer advice reaches the same standard as the wider advice market”.

An FCA spokesperson said its review would include a “sample of over 100 firms offering retirement income advice, which will enable us to obtain a statistically representative view of the retirement income advice market”.

A report on the review is expected to be released this year.