The Financial Conduct Authority (FCA) has admitted it is “actively looking at” professional indemnity insurance (PII) and capital adequacy requirements for advisers but has declined to give any further information.
On Thursday 27 February steelworkers from Port Talbot, Scunthorpe and Teesside descended on Westminster Palace to talk about their experience of being poorly advised to transfer out of their defined benefit (DB) pensions.
Some 50 steelworkers, along with representatives from solicitor firm Clarke Willmott and Echelon Wealthcare managing director Alastair Rush, who has been helping the steelworkers obtain compensation, met MPs and senior individuals at regulatory bodies in Committee Room 14 in parliament.
The meeting went on for more than three hours, during which time Philippa Hann, the solicitor representing the steelworkers, said she had looked at 450 files from 42 different financial firms and felt not a single one of those cases should have been advised to transfer out. Just one of those, she said, had the PI insurance likely to cover the claims and, as a result, the other 41 were likely to become insolvent.
“There are some very deep-rooted problems in the financial services industry… I don’t think it’s adequate that financial adviser firms are allowed to have any exclusions whatsoever for their past business, that’s an inherent problem that has to be solved and can be solved by the regulator,” said Hann.
MP for Aberavon Stephen Kinnock echoed Hann’s thoughts, asking the regulator directly: “Why isn’t the FCA actually going to the root cause of the problem and getting proper PII in place for the entire industry, which would address many problems and get the FCA out of the firing line?”
In response, FCA director of life insurance and financial advice Debbie Gupta said she personally agreed with the sentiment of Hann’s and Kinnock’s statements and that the area was “very much in [the FCA’s] sights”.
Professional Adviser later pressed Gupta further, asking whether the industry could expect an upcoming review or consultation on PI cover and capital adequacy requirements for financial advisers.
In response the director said she did not know, adding: “There are a number of areas I know we are doing a lot more work. If that work prompts a desire to change the way we operate the rules, then yes there will be a consultation… I can’t say that’s where we will end [but] I can confirm it’s an area we’re actively looking at.”
She then did not respond when asked what exactly “actively looking at” referred to.
During the meeting various steelworkers stood up and told their stories. When discussing the moment he decided to transfer out of the British Steel Pension Scheme, one steelworker said: “I have to live with that that decision every day of my life. I find it really hard to come to terms with.”
Elsewhere, the Financial Services Compensation Scheme revealed it had paid out just more than £3m in compensation to four firms in default which are known to have advised steelworkers: Active Wealth UK, Douglas Baillie, Intuitive Financial Associates and Omega Financial Solutions. In addition is has received claims in relation to S&M Hughes, which PA first revealed entered liquidation.
Overall the lifeboat scheme has received 110 claims of which 88 have been upheld.
Hundreds of steelworkers were given poor advice to transfer out of their defined benefit scheme a couple of years ago. Since then, many adviser firms involved in advising steelworkers have lost pension transfer permissions, while some have closed down altogether.