On the go: The City watchdog has released an assessment tool to help financial advisers understand whether the defined benefit pension transfer advice they have given was suitable.
The Defined Benefit Advice Assessment Tool assesses advice given before October 2020, with the Financial Conduct Authority expected to release an updated tool in the coming months incorporating rule changes that came into force from October.
That month saw a variety of new rules introduced, including a ban on contingent charging and the introduction of abridged advice.
The watchdog said it had used the tool in the latest phase of its review of the DB advice market, after it found too much of the advice on DB transfers it had seen was “still not of an acceptable standard”.
The tool set out key factors for advisers to consider when checking the suitability of advice and client disclosure, thereby allowing companies to understand what is expected.
The FCA has recommended that all advice firms, compliance consultants, auditors, insurers, and trade bodies use the tool.
It also said advisers should use it if they receive any complaints about past DB transfer advice or as part of carrying out a past business review.
The regulator stated: “Making the tool widely available is part of our work to improve the suitability of DB transfer advice.
“We have been conducting intensive supervisory work on DB transfers since 2015, and we have taken action against pension transfer advisers where advice has been unsuitable.”
The FCA is also expected to publish finalised guidance in the coming months setting out which processes advisers must put in place to deliver suitable DB transfer advice.
Tim Fassam, director of government relations and policy at trade body Pimfa, said while the tool would provide clarity, more work was needed to resolve issues in this area.
“DB transfer advice is an area where there has been a lot of confusion and uncertainty, so clarity on the regulator’s approach is welcome,” he said.
“There remains a tension between the pension freedoms philosophy, which says people know best what to do with their money, and customers who expect to have easy access, and a regulator that is uncomfortable with them utilising their right to transfer in most circumstances.
“While ensuring good consumer outcomes is paramount, further work will be needed to resolve these issues.”
As of June 2020, there were 1,965 companies in the UK licensed to provide DB transfer advice, a market which has been the subject of heavy scrutiny by the FCA in recent years.
In the same month, the regulator revealed more than 700 advice firms had relinquished their DB transfer permissions after intervention from the regulator.
This article originally appeared on ftadviser.com
