The Financial Conduct Authority has handed an adviser a warning notice for unsuitably advising clients to transfer out of their defined benefit pension.
Between April 2, 2015 and June 25, 2019, the FCA said the individual - who was not named in the notice - advised customers to transfer out of their DB scheme when it was not suitable.
During the period, the FCA said the individual acted as a CF30 and pension transfer specialist and were approved to perform both the CF1 (director) and CF10 (compliance oversight) functions.
The FCA said the "individual breached the statements of principle for approved persons when carrying out their controlled functions".
It argued the individual was "reckless" and thereby acted without integrity because they made personal recommendations despite having failed to obtain from customers adequate information relating to their financial situation, such as current expenditure details.
They also failed to adequately assess customers’ attitudes to investment and transfer risk, which was necessary for them to properly assess whether it would be suitable to transfer out.
The FCA said the individual also approved suitability reports which failed to provide customers with sufficient information from the transfer value analysis to enable them to be able to make an informed decision about whether to complete a pension transfer.
“This was despite knowing that each of these steps was a necessary prerequisite to providing a personal recommendation,” the FCA said.
The City watchdog said the individual failed to take any proper steps to ensure the firm adequately assessed the suitability of the pension transfer for the customer.
This included assessing customers’ objectives and attitude to risk and the firm did not do customer fact find processes meaning that insufficient information was gathered to assess suitability.
“This was despite knowing that their oversight failures increased the risk that the firm might provide unsuitable pension transfer advice to its customers, in breach of several Cobs rules applicable to the firm, and despite the significant increase in the number of customers seeking such advice during the relevant period,” the FCA said.
Additionally, during the period, the regulator said the individual acted dishonestly in relation to their financial affairs, agreed a settlement in respect of the dishonest conduct and failed to notify the FCA of the same.
“The FCA considers that the failings summarised above meant that the advice provided, both by the individual and the firm, did not comply with regulatory requirements and standards, creating a significant risk that the advice that a customer should transfer out of their defined benefit pension scheme would not be suitable for them.”
The regulator issued the notice on November 16, proposing to take action.
It said a warning notice is not the final decision of the FCA and the individual has the right to make representations to the regulatory decisions committee which will decide on the appropriate action and whether to issue a decision notice.
