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FCA: Only Half of DB Transfers Rated Suitable

October 2017
Money Marketing

DB transfers feel more heat from regulator as only third of product choices found suitable

The FCA has released findings of an assessment of defined benefit transfer advice showing just 47 per cent were rated suitable.

In an update on its work published this morning, the regulator has revealed the full scope of its work in the market.

Over the last 24 months, it has reviewed “detailed information” from 22 firms on their DB transfers, with 13 firms providing client files to the FCA after its initial analysis.

12 firms were visited, of which four decided to stop their DB transfer business.

As part of its wider work on scams, the regulator has identified 32 firms that chose to stop providing advice or put restrictions on the pension transfers they conduct.

The regulator has also released results of its suitability assessments at the firms it investigated.

Of 88 transfers that were advised to go ahead, it found only 47 per cent were suitable. In 36 per cent of cases, suitability was unclear, while 17 per cent were ruled unsuitable.

Separately, it assessed the suitability of the product and fund the customer ended up in. Only 35 per cent of these were suitable. 24 per cent were unsuitable, and 40 per cent were unclear.

The FCA said common issues included failing to account for personal circumstances sufficiently, not matching needs and objectives with the recommendation, and inadequate assessment of risk tolerance.

It also expressed specific concerns regarding the use of outsourcing and pension transfer specialists.

The note reads: “In some cases there was a lack of information sharing between the introducing firm and the specialist transfer firm. This resulted in unsuitable advice where the specialist firm did not have enough information about the client’s objectives, needs, and personal circumstances.

“We found firms where the adviser or transfer specialist made a recommendation without knowing where the transfer proceeds would ultimately be invested. In some cases the specialist transfer firm did not make a recommendation for a receiving scheme or investments.”

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