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These are proving to be difficult times for the reputation of the financial advice profession, and the reputation of the regulator - the Financial Conduct Authority (FCA) - is under parliamentary scrutiny pressure. And questions are also likely to be raised about pension scheme trustees duties of care.
Some financial advisers face questions over their business relationships, advice quality, and remuneration - questions that muddy the water for the countless compliant UK advice firms. The regulator, the FCA, faces questions about how quickly and effectively it acted to protect investors. The Scheme Trustees may yet face questions about their own due diligence and care towards their scheme members.
Most recently, the chair of the UK's parliamentary Work and Pensions Select Committee issued a report alleging that many British Steel Pension transfers retirees were "shamelessly Bamboozled" by advisers'
The issue for the advice profession is complicated - with introducers, Pension transfer suitability, and remuneration all concerned. It begins with their relationship with unregulated introducers - such as Celtic wealth's involvement with Active Wealth - a regulated advice firm that was voluntarily wound up this month. This moves then to the issue of the suitability of a Defined Benefit (DB) or Final Salary (FS) pension transfer, and ends with remuneration - is it commensurate with and appropriate for the work undertaken to provide the advice? Furthermore, some aspects of remuneration for these advisers - known as Contingent Charging - in essence means that the adviser earns more by recommending the transfer, rather than charging for example on a work time basis.
The regulator - the FCA - has had a great deal of experience in investigating pension mis-selling scandals in the past. Even as recently as 2016 and 2017 it was issuing alerts about DB transfer advice suitability and the use of unregulated advisers. It also had knowledge of one of the advice firms at the centre of the scandal, Active wealth (now closed following FCA intervention to stop it providing pension transfer advice), as Active Wealth was run by individuals from another former advice firm, Active Investments - itself closed down because of pension transfer advice complaints.
The scheme trustees have argued that the select committee report's conclusions are "not supported by the evidence." Nonetheless, the report makes challenging reading for the trustees, with MPs claiming that information provided to members contemplating a pension transfer was "woefully inadequate"
One conclusion is clear - Steel workers have been badly served by the some of the advice firms like Active Wealth, the FCA had a great deal of past experience in understanding pension scandals, and the scheme trustees have been sternly criticized. Will this be the last scandal - or will the MPs be listened to?
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