Keith Richards reflects positively as the financial services profession looks to stay one step ahead of the regulators with the launch of the Pension Transfer Gold Standard
The UK Financial Conduct Authority (FCA) recently published its conclusions about a new duty of care for financial services professionals. The FCA made it clear that legislation and rules alone were unlikely to provide “a one-size-fits-all solution to any weaknesses in consumer protection”.
It went on to say: “We will also continue our work on culture in financial services to help firms develop a clear understanding of what a healthy culture looks like, understand its benefits and ensure they are able to take proactive steps to change any ineffective cultures in their organisations.”
I am proud to say that financial advisers have not waited to build a stronger culture within their profession. Since the last edition of Personal Financial Professional, we have seen the successful launch of the Pension Transfer Gold Standard – a Pension Advice Taskforce initiative supported by the PFS. As I write, more than 600 firms have committed to its underlying principles, recognising its primary role in helping members of defined benefit (DB) pension schemes better understand the risks involved in transferring their benefits, what good transfer advice entails and where to access it.
With the launch of the Pension Transfer Gold Standard, our profession has reinforced its dedication to a strong culture that delivers for savers
Working with the Money and Pensions Service (previously the Single Financial Guidance Body) and the Pensions Administration Standards Association (PASA), the Gold Standard’s Consumer Guide provides a document to give members confidence that their adviser has their best interests at heart. The Money Advice Service will be highlighting adopters of the Gold Standard within its Retirement Adviser Directory as well as actively promoting the consumer guide, while PASA is actively encouraging the administration community to include the guide alongside all transfer quotations.
Margaret Snowdon, sponsor of PASA’s DB transfers working group and a member of the Pension Advice Taskforce, said: “We continually support any initiative that seeks to improve the quality of transfer advice and helps members gain efficient and safe access to their savings. As such, the Pension Transfer Gold Standard is a vital step forward in helping members build a better understanding of what good advice looks like and where to find it.”
Having worked closely with professional indemnity (PI) insurers in the creation of the Gold Standard, the Pension Advice Taskforce has good grounds to be confident that adoption of the Gold Standard will be welcomed by them. If we are to avoid a repeat of the British Steel Pension Scheme debacle and its negative impact on the wider advice community, it is imperative that consumers are better informed and that as many advisers as possible who are active in this advice space see the value in adopting the Gold Standard going forward.
The point about PI insurance is particularly important in the context of the FCA’s announcement this month that the Financial Ombudsman Service limit will rise from £150,000 to £350,000. The impact of this increase will be most acute in the pension transfer space, with the FCA estimating a 140% price increase in pension transfer premiums and some PI insurers estimating a far higher increase.
I have written to the chief executive officer of the FCA to express my concern, following feedback from members. As a professional body, while we remain in favour of appropriate consumer protection, we nevertheless remain deeply alarmed by the hitherto lack of wider consultation in relation to the unintended consequences of this action, and we will continue to raise the issue with both the FCA and HM Treasury.
As a profession, we have a choice to make between exercising a strong duty of care for our clients to prevent poor outcomes, or, on the other hand, paying the cost of exercising a weak duty of care in the form of indemnity insurance, Financial Services Compensation Scheme levies and regulatory fees.
With the launch of the Pension Transfer Gold Standard, our profession has reinforced its dedication to a strong culture that delivers for savers.
This kind of commitment to high standards will reinforce the case we are making to the regulator. It will remind the FCA that by increasing the cost of providing advice to clients, it is ultimately hurting the consumers it is charged to protect. Ultimately, the best tool we have for influencing regulation is the high standards of conduct we choose to live by as professionals.
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PFS member email: email@example.com
Pension Advice Gold Standard: thepfs.org/ptgs
PFS financial planning and good practice: pfspower.org
Good practice hub: thepfs.org/good-practice