FCA opened 67 investigations into DB transfer advice over last three years

Stephen Little reports

The Financial Conduct Authority (FCA) has opened 67 investigations into defined benefit (DB) transfer advice misconduct claims over the past three years.

However, while the number of complaints to the Financial Ombudsman Service (FOS) has significantly increased, the number of investigations by the FCA is falling.

A Freedom of Information (FOI) request made by financial consultancy firm Duff & Phelps disclosed that four investigations into firms and seven investigations into individuals suspected of DB transfer advice misconduct have been opened by the FCA in 2020 so far.

A total of 46 cases were opened by the FCA in 2018 but in 2019 this number dropped to a total of 10 cases.

As of June 2020, there were 1,965 firms licensed to provide DB transfer advice.

In 2018, the FCA published an update revealing advice on DB pension transfers was suitable in fewer than 50% of cases, and pledged to follow up with every active firm in the market in 2019.

A further FOI request revealed that consumer complaints to the FOS concerning DB transfer advice rose 26% from 441 in 2018 to 554 in 2019.

The number of complaints for 2020 currently stands at 504 for the period between January and August 2020, suggesting 2019’s figure will be surpassed.

Contingent charging ban

In October, the FCA banned contingent charging to remove the conflicts of interest that arise when a financial adviser only gets paid if a transfer goes ahead. It said the ban would help good advisers, who will often advise clients to stay put, to compete.

The watchdog said to address ongoing conflicts, advisers must now consider an available workplace pension as a receiving scheme for a transfer and, if they recommend an alternative solution, demonstrate why that alternative is more suitable. It believes these measures will help reduce the need and costs for ongoing advice.

Duff & Phelps managing director of compliance and regulatory consulting Mark Turner said: “The FCA’s decision to go ahead with this ban is part of a broader agenda of them taking decisive action where markets are not seen as supporting the best interests of consumers.

“Now is an important time for regulators, advisers and consumers to stay vigilant. As the initial shock of Covid-19 begins to plateau, regulators have already begun to refocus their attention to issues and concerns which might have taken a backseat in recent months—and defined benefit transfers will return to the forefront as a key area for scrutiny in the following months and years.”