The FCA has published yet more guidance regarding defined benefit pension transfers.
The finalised guidance amends and adds to the rules and guidance introduced in October 2020 with immediate effect.
Through its review of the market, the FCA state that there is some high quality advice that is being provided to consumers but it maintains that, for the most part, advisers continue to struggle with understanding the regulations and guidance surrounding defined benefit transfers. As a result, advisers continue to fail to provide consistent and suitable advice mainly due to poor record keeping and confusion regarding what constitutes acting in a client's best interest or whether a conflict of interest might exist.
The guidance also provides further clarity with regards to financial promotions, the scope of which will cover unsolicited personal meetings, social media posts and voicemails left for clients. It also highlights issues and provide examples of good and bad practice in order to assist firms in identifying weaknesses in their existing advice processes.
The FCA recommends that all firms utilise its Defined Benefit Advice Assessment Tool in order to understand how the FCA will review the advice provided.
The FCA continues to refine guidance in order to overhaul the approach to defined benefit transfer advice. The watchdog hopes that this will lead to better advice processes which it also hopes may lower professional indemnity (PI) costs for advice firms. This may be wishful thinking as underwriters will be more interested in the standard of advice given in the past (from which claims may subsequently arise) than in the (hopefully improving) standard of advice in the future. What's more, the hardened PI market has been impacted by other factors, such as the increase to the Financial Ombudsman Service's compensation limit to £355,000. The FCA's finalised guidance can be found here.
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