The Financial Services Authority is urging firms to ensure they meet its financial promotions standards for home reversion plans and self-invested personal pensions before they become regulated tomorrow.
The FSA conducted thematic work on Sipps and home reversion plans (HRPs) and found that, if the products had already been regulated, it would have “significant issues” with their financial promotions.
On Sipps specifically, the regulator assessed a sample of 34 press financial promotions issued over a 12-month period and 18 website financial promotions and found only 50% of the press and 22% of the website promotions met the standards which will apply from tomorrow.
Common problems included:
- Lack of balance – promotions gave the perceived advantages of a Sipp without mentioning the disadvantages and risks;
- Encouraging transfers into Sipps but failing to mention that not all transfers may be suitable and that it may be best to seek advice;
- Suggestions that Sipps are a superior form of pension provision by making unproven statements that most industry professionals or most professional investors have taken out a Sipp;
- Offering inducements, such as no set charge, without mentioning other charges will apply or commissions will be charged; and
- Promoting the fact retirement benefits may be taken via income drawdown but failing to mention the risks of drawdown
Similarly, the FSA’s review of a sample of HRP financial promotions found firms did not always present the features of the plans in a balanced way.
If promotions describe a feature of any HRP, they must give no less prominence to the possible disadvantages than to the benefits associated with that feature; and they must not use design, content or format which disguises or diminishes the significance or any statement or warning.
The FSA says it will review promotions after the onset of regulation and will take appropriate action if it finds shortcomings.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7034 2680 or email [email protected].IFAonline
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