After two decades in the financial industry, Compliance and Training Solutions director Mel Holman has seen it all.
Running a successful compliance consultancy with 200 advisers on her books, she has learned to understand the confusion that still exists in the advice community about certain rules, and the “honest mistakes” and oversights that can happen in any well-run company.
As advisers are heading towards one of the biggest regulatory changes in a decade — the consumer duty — Holman reflects on the crunch points and why they could become more significant in future.
One of the things she has come across repeatedly since she set up Cats in 2005, is companies or advisers unknowingly acting outside their permissions, which is a breach that is notifiable to the Financial Conduct Authority.
Holman says that with pension contracts, for instance, the devil is often in the detail and it can catch advisers out.
“We’ve had instances, for example, where a firm’s got limited [defined benefit] pension transfer permissions, which means they can advise on a policy that’s got a guaranteed annuity rate or a money purchase occupational pension scheme,” she says.
“There are times when you may get a bit of a random contract coming through — it’s a small pot and it has something along the lines, it doesn’t say guaranteed minimum pension but it says a guaranteed pension, for example.”
Some advisers took this to mean a Gar, which means they are not breaching the rules but it is not actually a Gar, Holman says. “If there’s a statement that says you’ve got to sign a form for an adviser to confirm you’ve had advice that suggests it’s safeguarded benefits and therefore the limited permission is not sufficient, you need full DB pension transfer permissions.”
On an individual basis, advisers have been acting outside their permissions when they either were not qualified to give certain advice, such as to sell down shares on a platform, or they were qualified but had not ticked this activity on their “statement of professional standing” — or the SPS was not renewed on time.
When such a breach occurs, Holman recommends notifying the regulator, which she says does not usually come with any bad consequences as long as it is properly explained. But it can be a tough task to get remedied.
“You get a very grumpy letter from the FCA [asking], ‘what happened?’,” she says. “You have to go back and review all the business that the planner has done from the time it’s expired, and report back to the FCA what you’ve done, what the findings are, any unsuitable advice, how you’re going to make sure it doesn’t happen again. And for some firms that has been chunky.”
