The Financial Conduct Authority (FCA) is writing to around 1,600 IFA firms in a crackdown on pension transfer business. The regulator is concerned that too many clients are being advised to transfer money out of defined benefit (DB) pension schemes. As part of the investigation, the FCA is also asking advisers to provide proof of their professional indemnity cover.
The regulator’s move follows a market-wide probe into the DB transfer market last year. The FCA said that its survey of DB transfers showed that in too many cases advice was not of an acceptable standard.
Now letters ordering firms to rectify risks have been sent to around 1,600 of the 2,500 firms active in the DB market. The letters are tailored individually to firms and set out the steps that the FCA wants to see them make to their DB transfer processes. Firms which do not respond or take no action after being contacted by the FCA will face further regulatory action.
The FCA is also proposing a ban on contingent charging for DB advice, which it believes can lead to conflicts of interest for IFAs.
The demand to see professional indemnity policies was dubbed as ‘surprising’ by one IFA who spoke to FT Adviser. He said that IFAs were usually asked to input information about their PI policies into the FCA’s Gabriel reporting system. However, Alan Chan, director at IFS Wealth & Pensions, told FT Adviser that it was good that the FCA was asking to see copies of the policies. “There are many policies that now come with exclusions and it’s impossible to list all these and the various conditions on a Gabriel return,” he said.
James Burgoyne, Director – Claims & Technical, Brunel Professions agreed that exclusions could cause difficulties for IFAs: “Any adviser worried about their cover can contact us for guidance on ambit of cover, PI policy wordings and activities they currently have excluded.”
Brunel secures competitive professional indemnity insurance cover for IFAs. To find out more visit the Brunel website or call Mark Sommariva on 0203 475 3275.