On the go: The Financial Conduct Authority intends to ramp up its supervision of the most active firms in the transfer advice market, after finding that 69 per cent of people seeking advice had been recommended to transfer between 2015 and 2018.
Data published by the watchdog from 3,015 firms between April 2015 and September 2018 showed that much pension transfer advice was not of an acceptable standard.
The FCA expects advisers to start from the position that a transfer is unlikely to be appropriate for their client. It expressed its concern that nearly seven out of 10 of people seeking advice had been recommended to transfer.
Between April 2015 and September 2018, 234,951 defined benefit scheme members received transfer advice. Of those receiving advice, 162,047 members (69 per cent) were recommended to transfer out, with 72,904 members (31 per cent) recommended not to transfer.
Of those advised not to transfer, 9,534 (13 per cent) of those clients transferred as ‘insistent clients’.
Furthermore, of the 171,581 clients who were recommended to transfer or who transferred as insistent clients, 120,735 (70 per cent) signed up to ongoing advice from the firm recommending the transfer.
The average transfer value was £352,303 – equivalent to a total value advised upon of £82.8bn. This compares with £1.6tn in DB schemes eligible for the Pension Protection Fund as at March 31 2018.
The FCA has said it will be assessing the advice firms most active in this market throughout the remainder of 2019.
It will also write to firms where the watchdog has identified potential harm in their DB pension transfer advice from the data received, and the FCA will set out its expectations and the actions these firms should take.
Depending on the outcome of the assessments this year, the FCA will look at extending its assessments to take in a wider range of firms next year. It will also roll out a number of events in 2020 aimed at boosting standards in the industry.
Commenting on the data, Megan Butler, executive director of supervision, wholesale and specialists at the FCA said: “We have said repeatedly that, when advising on DB transfers, advisers should start from the position that a transfer is not suitable. It is deeply concerning and disappointing to see that transfers are still being recommended at the levels we have seen.”
Tom Selby, senior analyst at AJ Bell, said that “the fact the majority of people who take DB transfer advice are being advised to give up their valuable guaranteed benefits is understandably a cause for concern for the regulator”.
He added: “Advisers who have recommended DB transfers to clients are firmly in the FCA’s cross hairs and can expect further scrutiny over the coming year.”
