Financial firms still delivering high levels of unsuitable advice on pensions switching, financial watchdog finds

News - Savings

Written by Ray Clancy

Monday, 12 April 2010 08:22

Financial Advisors have been ordered to pay out more than £150 million in compensation to clients over pensions switching and many firms are still giving out high levels of unsuitable advice.

The UK Financial Services Authority said there has been a great improvement in the market with many firms reviewing past sales and procedures to deliver improved outcomes for customers.

But following an initial review in 2008 it has carried out further assessments of 22 firms that posed the highest risk of offering poor advice. It found that of 251 files, 34% involved unsuitable advice, in 31% of cases it was unclear whether the advice was suitable and in 35% of cases the advice was suitable.

Six firms have been referred to the FSA’s enforcement division as a result of work on pension switching. RSM Tenon Financial Services and Charles Palmer of Financial Ltd have already been hit with fines.

The FSA is currently in discussions with a number of firms on the format and extent of further remedial work so the number of cases to be reviewed and the redress payable is expected to increase.

It says its follow up work highlighted additional concerns. Some advisers were found to be offering portfolio advice services, where the additional costs were not justified for a particular customer. It also saw examples of tied advisers not investigating a customer’s existing pension arrangements.

Director of conduct risk Dan Waters said that more than 10% of all pension switching advice given since April 2006 will be looked at again as part of the past business reviews firms are carrying out, adding that the FSA will not hesitate to take further action.

‘The actions we have taken to raise standards have driven significant change in the market and will see large sums of money returned to customers who received poor advice. Although many firms have changed the way they operate, we remain concerned that some continue to give poor advice,’ he explained.

‘Ignorance is no defence and we will continue to focus on the high risk firms through intensive supervision. We will not hesitate to take tough action against any firms that fall below our standards,’ he added.