I have just read the FCA’s notice on DB transfers. The tone of the notice is frustrated and even threatening which is entirely fair based on the very long list of issues it has found. If you are involved with DB transfers and haven’t read the notice, you should, you really should.
So what does it say? It says you’re rubbish, basically, although it qualifies this by saying that the sample of firms and files is not representative of the whole of the market. But don’t use this as a reason to think this doesn’t apply to you, it does. You might say the problem is with the large firms, the VIFs, the outsourced firms, the restricted firms, the networks. Anyone but you. You no doubt think you are very diligent with your clients, undertake a full analysis and give suitable advice. Well, I don’t buy this argument. Indeed, several of the commenters after articles about DB transfers take this approach of blaming others but, from some of their comments, I have significant concerns that the problem does sit with them and that they are providing unsuitable advice.
Often people say the FCA should have done X or Y, or should have acted earlier, were asleep at the wheel, is not fit for purpose. But it’s not the FCA’s fault. It’s your fault. Yes, yours, the advice sector. You might say that the FCA should have made its position on advice clearer, earlier. Nonsense. You are advisers, this is financial advice, your area of expertise is providing suitable advice. But you haven’t been, not consistently enough. It is you that are failing in your area of expertise.
If you look at the long list of issues the FCA have found, they are not fine lines or technical breaches of the rules and guidance, they are basic issues:
- “Using generic objectives in fact finds, such as ‘flexibility’ or ‘increase pension’”. Most people who have heard me present at events in the last few years will have heard me talking about the need for colour and detail about the client’s objectives. These is basic fact-finding skills (or basic record-keeping issues)
- “Using generic objectives to justify a transfer …, without obtaining the necessary information about those objectives”. You may have heard me talking about saying “when there is a what, you need a why” in relation to client objectives
- Also, in relation to the above two, I have frequently said never use templated objectives or why suitable
- “Failing to adequately manage situations where the client had multiple competing objectives.” What happened to prioritising objectives?
The list goes on. And on. There are around 20 issues that the FCA have found where it found recurring problems, some even more basic than the ones listed above. These do not come from a failure of regulation, they come from a failure of advisers, and very basic failures at that. You may think I am just saying ‘I told you so’; I am. But more importantly, so is the FCA. I find the FCA’s findings extremely frustrating as well as depressing. I said the FCA’s tone in the notice was frustrated. It is clearly frustrated with the lack of improvements in this area. It won’t just keep on being frustrated if standards don’t improve.
This is a rant, unashamedly so. But I, and the FCA, have been banging on about these points for years and years. The sector has had everything it needs from the FCA to get this right. It is now for the sector to get it right. If it doesn’t, the FCA will be forced to take further action of some form or another, and you certainly won’t like it; but if it does, it will be your fault.