The Financial Services Authority has taken action against a Swindon-based IFA over failures in connection with providing pension transfer advice.
It has prohibited Ivan and Valerie Richards, partners and owners of IFA firm Alexanders, from performing certain controlled functions related to regulated activities, with Mr Richards specifically "prohibited from giving pension transfer advice", while Mrs Richards is "prohibited from performing any significant influence controlled functions".
The decision is based on the advice provided by Alexanders regarding the transfer of employees from membership of the final salary pensions of one manufacturing company to the group personal pensions scheme of another, following a company takeover.
However, the FSA says it took action “as a result of serious systems and controls and oversight failures”, which caused 650 people to be exposed to the risk of significant financial loss arising from advice to transfer their pensions from deferred membership of a final salary scheme into a personal pension plan.
It says the failures at Alexanders, which it particularly blames on Mr Richards, included “putting in place a flawed advisory process which led to the transfer of occupational pension benefits when this was potentially unsuitable for clients and exposed them to the risk of significant loss and detriment”.
The decision notice, which was issued on 27 April, also notes Mr Richards failed to: “communicate in a clear, fair and not misleading manner”; to ensure sufficient personal and financial information was collected to make suitable recommendations and did not adequately assess the attitude of risk of the client.
And it adds: “These failures were compounded by your knowledge that the process you had devised and employed was one that, compared with your business as usual procedures, was streamlined and resulted in you being unable to adequately check files before signing of the advice and the suitability letter.”
“You lacked the experience and organisational capacity to effectively carry out such a large transfer exercise and the level of input you employed from the compliance consultancy was insufficient to adequately compensate.”
In addition the FSA argues Mrs Richards was “unclear as to her responsibilities as a partner of Alexanders”, and as a result she failed to appropriately inform herself about the pension transfer business conducted by the firm and failed to take adequate steps to ensure such business was conducted in a compliant manner.
However, since this transfer occurred Alexanders IFA Ltd has become responsible for regulated business conducted by Alexanders, so the FSA says the new firm is to "undertake a past business review which will identify any instances of unsuitable advice and assess and determine appropriate compensation for loss arising from such advice”.
Jonathan Phelan, head of retail enforcement at the FSA, says the transfer process advised upon and administered by Alexanders was “fundamentally flawed” as shown by the firm's failure to establish the overall attitude to risk of customers whose pensions were being transferred.
And he adds: "The serious failing identified arose from a lack of control by the partners of Alexanders. In line with our consumer protection objective the FSA will ensure that individuals are prevented from holding significant controlled functions at firms where they do not have the necessary qualities to perform the role in question to the required standards."
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 Nyree Stewart on 020 7034 2681 or email [email protected]IFAonline
'Right thing to do'
£69m spent on upgrades
European fintech market 'underserved'