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The FSA has today issued its second fine in as many weeks over concerns on pension switching advice, but it is interesting to note case checking has been of particular interest to the regulator.
Charles Palmer, director of Financial Ltd, was fined £49,000 for failing to ensure his business had adequate compliance checking procedures in place for pensions switching business.
Insufficient checking of pension transfers was also a major factor in a £700,000 fine levied against RSM Tenon last week.
Financial Ltd could be seen a major success story, growing from a small network with a handful of appointed representatives in 2002, to a business overseeing more than 400 individuals today.
But as a business grows, so do its responsibilities, and Mr Palmer's failure to grapple with the challenges of running such a large firm have left him £49,000 out of pocket today.
Meanwhile, Tenon was criticised for not properly checking its advice complied with the FSA's standards, and there are also similarities to a fine levied against former Park Row CEO, Peter Sprung, who did not allocate adequate resources to ensure his compliance team could thoroughly check files.
It seems the FSA is sending out a warning that ignorance is no excuse if your customers end up receiving unsuitable advice.
For some years the regulator has emphasised the need to document client information, but this will all be for nothing if no one is checking the files or are unsure what they are looking for if they do.
Obviously there is a cost involved in rigorous compliance checking, and some firms may feel it is a pointless exercise when they consistently see their advisers making good recommendations.
However, an effective compliance process may help to motivate advisers to go that extra mile and ensure they have considered all the needs of their clients.
Firms need to look at compliance, and effective checking, in a more positive light. When the reports are filed and it seems all is well, it should be a cause for celebration, a chance for everyone to feel they have done a good job and are providing a great service for clients.
If that isn't motivation enough, it's worth remembering that forking out for extra compliance resources is certainly preferable to an expensive FSA fine.
John Bakie is senior reporter for IFAonline
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| Comment | What have we learnt from the FSA's pension fines? |
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FSA pension jerks
Time for the Regulator to hold up its' hand, fine itself and compensate the millions who took it's advice that occupational pension scheme benefits were guaranteed. This was often a childish untruth which subsequently blew up in its' face. I thought how amateurish and 'green' of them to say so at the time. The regulator has lacked commercial maturity since the day it formed because it is not run by financial people, but rather by government administrators. It should also be apologising and compensating a few IFA's whose careers it damaged via the so-called 'pensions misselling scandal', they themselves having presided over what became a much bigger one. The sooner they are disbanded the better. Please put your crosses in the right box' in the summer. C'mon people!
Posted by: Old Survivor
Stupid people in stupid organisation
I agree with old survivor. What c*cks ups the prnsion review was. When I pointed this out the the "so called" Independent Commissioners Office re FSA c*ck ups they laughed at me saying how could one have predicted what was gojng toi happen. e.g. IFAs were made to compensate on transfers from final salary schemes and top up those pps. Now the scheme which they were transferred from are mostly insolvent and ion fact the IFAs had done them a favour, but got penalised by a STUPID REGULATOR. How dare people like this get away with major mistakes which others pay for and they are unaccaountable to themselves. This is worse than the communists. As at least they know what they are in for, here thanks to Nasty Labour we're are constantly lied to wit the pretence of democracy. Only problem is who doens one vote for as Mark Hoban for the Tories knows nothing himself!!!
Posted by: Incompetent Regulators Award Team
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Compliance: real or artificial?
The FSA has presided over artificial compliance for many years, so it's good to see the regulator checking files,and essential that firms check them randomly beforehand, of course. Even so, I wonder to what extent the checking of what are often 'sales' truly reflects the quality of advice that is actually being given. The reason I question this is because a firm's business day book often represents only a small percentage of the actual advice given to clients. Most of the time and advice I give does not involve any new product sales (with resultant commission) and very often no fee either. There are dozens of examples of giving very specific financial advice to clients without a product sale, without commission, or a fee, because many (conscientious|)IFA's have been servicing clients properly for years on the basis of receiving renewals. Almost every telephone call received each day involves giving some advice, either immediately, or after due diligence has been carried out. This may or may not involve correspondence with the client, but notes are usually maintained on file as a matter of good practice. Done properly, servicing of clients existing arrangements is a full time job and reasonably well paid. It comes before anything else as a duty. How is the quality of this advice checked at present? Because if the FSA is just going to check files from new business recorded in the 'business day book',if that is really all they are interested in, then they haven't even scratched the surface.
Posted by: paul terry