The FCA’s department head for advisers, wealth and pensions, Nick McGruer, nodded to this yet-to-be-published Dear CEO letter back in October at the Lang Cat Home Game event in Edinburgh.
McGruer also said at the time that the FCA was "increasingly turning" its focus to retirement income strategies following its work on defined benefit pension transfers in recent years.
Plans for retirement income advice
In the letter published on Friday, Chambers reaffirmed this saying retirement income advice “will be a focus for us over the next two years”.
She added: “We will communicate more details of the specific work planned in the coming weeks. We will act to mitigate any risks or concerns we identify as a result.”
Until now, the FCA has focused on advice provided around defined benefit pension transfers. It recently announced a consumer redress scheme designed to cover firms that have provided advice to former British Steel Pension Scheme members.
Almost half (46 per cent) of the advice the FCA reviewed in relation to this scheme was unsuitable.
“Where consumers experience unsuitable advice, we see this is often driven by individual behaviours, misconduct, lack of integrity, unmanaged conflicts of interest and weak systems and controls that fail to provide adequate oversight,” the FCA said.
“Firms may consider a regular review of a sample of client files appropriate to check the quality of advice provided and external file reviews can be a useful tool for firms when considering the quality of advice that consumers received.”
Other areas of improvement cited in the FCA’s letter included “robust due diligence”, both on investment suitability and on third-parties operating the investment, phoenixing, and capital requirements to cover claims.
The regulator said it expects firms to assess their risks in totality and hold sufficient financial resources to cover those risks and potential liabilities, “which will often be above the minimum requirements”.
The FCA recently fined a firm £2.4mn for bad pension transfer advice. The firm, according to Companies House records, holds just £600 at the bank after falling into insolvency.
More than 200 claims totalling over £13mn against the firm have been paid out by the Financial Services Compensation Scheme.
ruby.hinchliffe@ft.com
