Preventing The Next Pensions Scandal

What does ‘poor advice’ on defined benefits pension schemes look like?

At Ovation, we take the approach that anyone looking to provide advice on taking a transfer from a DB scheme should, as a minimum, insist upon a cashflow forecast and an ongoing investment strategy. Who actually manages the investments is less important, just so long as the transfer doesn’t end up in cash long term.

We therefore believe that any firm who indicates to a new enquirer that full financial planning as outlined above is not necessary, or that they will make sure the process results in a thumbs up to transfer, is giving poor advice.

I’m sure many advisers have seen such cases, and worse. What is likely to play out here? We’ve seen it before. These firms will make hay, then when the inevitable review comes along and clients make complaints, they will wind up their business and dump the liability on the FSCS. Which means we, the good guys, will be paying for their crookedness.

Well, there is good news. The FCA are very interested.

Following an article in New Model Adviser, I was contacted by a chap from the FCA about a case similar to that outlined above. There are people in the FCA who are watching this activity very carefully.

He explained to me the action he was able to take, which might involve speaking to one or more the directors, compliance officer and/or shareholders.

The FCA would like to hear more of your stories. Name names. Tell them who are the firms providing poor advice in the DB market.

When the inevitable pensions scandal comes around, don’t go blaming someone else if you didn’t do anything about it at the time.

The best way to inform the FCA is via their contact centre. The relevant department investigating pension scams will get the message.