Is the FCA working for you?

Article by Phil

As a consumer you could be forgiven for wondering whether the Financial Conduct Authority (FCA) is there to help protect you or is actually doing exactly the opposite. Especially when it comes to pensions regulation.
On the one hand the FCA has raised the Financial Ombudsman Service (FOS) compensation limit from £150,000 to £350,000, which on the face of it seems to be a good thing. But, the latest minutes from the FCA’s board meetings show that the FCA acknowledged that increasing this limit could have a significant impact on the ability of smaller financial advice firms to secure Professional Indemnity Insurance (which is required to be able to provide advice). The notes show that the FCA took the view that this might not be a bad thing anyway, because it would lead to a smaller number of advisers being able to operate in the field (of defined benefit pension transfers), which would mean that the providers left would provide “affordable advice”. Now I don’t know about you, but I can’t think of many situations where less competition leads to lower prices? So, I’d expect the trade-off for an increased level of protection in the event of extreme levels of compensation being awarded, will be that most consumers will no longer be able to find an adviser prepared to help them with their pension transfer. Especially those with smaller fund values, say below £500,000. I’d also imagine that those who can get advice will find that the advice is anything but “affordable”.
Strangely, at exactly the same time, as deciding that a smaller number of firms providing advice is a good thing, the FCA announced that it is set to start to investigate the advice provided by the very biggest firms who have provided the most pension transfers, because the evidence from their initial investigations is that only 48% of the advice reviewed is appropriate. Does that sound like it sits well alongside making the biggest firms even bigger? Especially, when you look at this move alongside another breaking story that St James Place (one of the very biggest firms in the market – if not the biggest), has been referred to the FCA by the Pensions Ombudsman on the back of a complaint, where SJP has been found to have “inadequate systems”, which led to it failing to be able to account accurately to a client who wanted to transfer their pension out of SJP.
So here we have the FCA investigating the biggest pension transfer firms because of concerns about quality of advice, the Pension Regulator ruling against the very biggest firm and in the same breath the FCA saying that it thinks smaller firms not being able to provide advice is a good thing.
Confused, so are we?

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