The Financial Conduct Authority's (FCA) warning about the suitability of defined benefit (DB) transfers was “reckless and wholly disproportionate,” the Personal Finance Society’s (PFS) chief executive has warned.
Last week, the regulator said it is "very concerned" that too many firms are not consistently providing suitable advice on pension transfers, after finding less than 50 per cent of the advice it had reviewed was suitable.
As part of its latest work, the regulator looked at 18 firms, which had given advice to 48,248 clients on their defined benefit pension schemes resulting in 24,919 actual pension transfers, since April 2015.
Keith Richards told FTAdviser that the regulator’s warning specifically selected only 174 cases from these firms, which is an “insufficient sample review”.
He said: “It is difficult to see how scaremongering is in the public interest, given the disproportionate and distorted message it portrays.
"It will also likely have a negative impact on an already hardening [professional insurance] PI market and the availability of advice under pension freedoms legislation.”
Mr Richards noted that a few days ago (December 5) prime minister Theresa May issued a warning that HM Treasury and the FCA would clamp down on rogue advisers.
He said: “The majority in the profession actively support rooting out the bad apples – albeit we caution from history the necessity in avoiding tarring every professional in the sector with the same brush.
“Recent concerns surrounding DB transfers have already sent PI insurers running for the hills, leaving many advisers facing increased premiums, increased excesses, and in some instances, no ongoing cover. The market continues to be a challenge with increased costs being experienced across the sector.”
Mr Richards argued that FCA’s public statement will “serve to compound the issue – it can only be described as reckless and wholly disproportionate”.
FTAdviser reported yesterday (December 11) that the FCA’s former technical specialist Rory Percival believes advisers are to blame for the watchdog’s recent findings, which he considered "extremely frustrating as well as depressing”.
Mr Richards also criticised the regulator’s plan to raise the Financial Ombudsman Service (Fos) compensation limits to £350,000 “without first addressing the current rising cost of providing regulated advice,” which “threatens consumer interests more broadly”.
At the moment, the Fos is limited to awarding compensation to a maximum of £150,000 but the regulator has proposed increasing this as part of its plans to expand the ombudsman's services to small and medium enterprises (SMEs).