As the industry gets to grips with the findings of the FSA's thematic review into pensions transfers it is clear there are some hard lessons to be learned. Pensions transfer activity has been high since A-Day as people look to consolidate their pension assets and look to their advisers to point them in the right direction.
However, the recent review has shown that in many cases this is not happening. The review has highlighted many, often basic failings in the advice being given.
The FSA reviewed 500 cases across 30 advisory firms. In a quarter of these firms roughly one third of their cases were seen as being unsuitable. Advice errors included transfers being made that incurred extra costs that were not explained to the client, recommendations being made that did not suit the client's attitude to risk and in some cases the client unknowingly lost out on benefits as a result of the transfer.
The review has highlighted the very real need for appropriate processes being put in place to allow advisers to evidence why decisions have been taken. The FSA will be writing to 4500 firms going forward to highlight what guidelines it expects advisers to follow so hopefully improvements will soon be seen.
However, it is important to note that while some advisers are guilty of giving poor advice they are by no means in the majority. Indeed, the errors uncovered in the review were confined to a certain number of firms rather than being spread throughout the sample. This demonstrates that the majority of firms assessed under the review DO give suitable advice to their clients on transfers.
So it would seem that all is not lost. The majority of advisory firms have the knowledge and processes in place to give the best advice to their clients and it is right that those who don't have and will be discovered. The FSA will continue its scrutiny in this area throughout the coming year with a series of assessments and those found wanting will need to improve their processes and where necessary, recompense their clients. Of course those who already pride themselves on their knowledge and processes will have nothing to fear.
This review has been a much needed wake-up call for pensions advisers to make sure they are as good as they can possibly be. If they take the review's findings on board we can look forward to a stronger, more competitive pensions industry going forward.
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