Adviser > News > May 2010 > Pension switching – part deux
Pension switching – part deux
Are your thematic review processes compliant? Find out areas of concern the FSA highlighted in their recent assessments of adviser firms.
The FSA published their thematic review into pension switching in December 2008, together with a clear warning that they would be carrying out follow up assessments. In 2009 Scottish Life ran a number of workshops with independent advisers and we can now provide a summary of the latest FSA feedback.
The original review
From the sample of 500 cases, the FSA found 16% of files contained unsuitable advice1. Four topics were highlighted as areas of concern. These were:
- Additional costs for unnecessary features
- Recommendations that did not match the consumer's attitude to risk
- Failure to explain the need for ongoing reviews
- Loss of existing benefits without good reason
Follow up assessment
The FSA carried out desk-based reviews2 with 22 adviser firms, including 12 smaller firms and 2 banks. They also sent a questionnaire to 250 smaller firms asking them to outline what action they had taken.
The headline results are that two firms and one individual have been fined for failings in their process3. Six more firms have been referred to enforcement.
Advice was judged unsuitable in 34% of the 251 files reviewed. This is obviously higher than in the original review. However the FSA seem fairly relaxed about this given the fact that they specifically targeted "high risk" firms.
The reasons the files were judged to be unsuitable were broadly the same as in the first review, however the FSA also identified two new issues:
- Use of portfolio advice services where additional costs are not justified.
- Tied advice firms preventing analysis of products outside their range, particularly the existing arrangement.
Actions for advisers
-
Make sure you have something to report when the FSA ask what action you have taken. Some firms that reported they had carried out reviews of their processes and not found any failings were considered to be "not challenging enough".
-
Make sure that if you use portfolio management services you are clear about any extra costs. You will have to justify the expense and demonstrate what additional advantage this gives to the client.
- Highlight importance of independent advice and the fact that you are qualified to review the client's existing arrangements properly.
Scottish Life can help you
Our Governed Range offers a portfolio advice service that doesn't cost the client more and meets the FSA's requirements. For information on our investment options, visit www.scottishlife.co.uk/investments or contact your usual Scottish Life representative.
You can also visit www.scottishlife.co.uk/pensionswitching for support material to help you review your clients’ existing pension plans.
References:
- Quality of advice on pension switching - A report on the findings of a thematic review, FSA, 5 December 2008.
- Quality of advice on pension switching – an update, FSA, April 2010.
- RSM Tenon Financial Services Limited were fined £700,000, Charles Palmer was fined £49,000 and Robin Bradford was fined £24,500, FSA.
For professional advisers only
