FCA fines adviser for unsuitable BSPS advice

FCA has fined Pembrokeshire Mortgage Centre Limited £2,354,331 for giving unsuitable advice to consumers to transfer out of the BSPS and other DB pension schemes.

FCA found the firm, which is in liquidation, had advised 93% of 420 consumers, nearly two thirds of whom were BSPS members, to transfer out of their DB scheme. FCA found the advice was unsuitable in 60% of cases and criticised the firm for not giving customers the quality of advice they needed to make an informed decision, especially given that many of them were in a vulnerable position because of the uncertainty surrounding BSPS and the short amount of time they had to make their decision.

Among FCA’s criticisms were:

• in many cases, the firm did not gather sufficient information about the customers’ needs, income and expectations to enable it to give suitable advice;
• the firm was under-resourced, meaning that it sometimes did not follow its own procedures for checking advice was suitable;
• suitability letters were generic, did not provide appropriate explanations and in some cases seemed to have been copied from other letters meaning there were both errors and contradictory, confusing and misleading statements;
• the firm often accepted the customer’s insistence that they wanted to transfer away from BSPS as a good reason to advise them to do so – and many suitability letters stressed the benefits of not transferring while ultimately advising a transfer; and
• some of the worst cases saw consumers being advised to transfer out where they were relying on the guaranteed income for their retirement and could not afford to bear the risk of transferring out – including where they had dependents needing long term care.

FCA says it will give preference to creditors of the firm ahead of its financial penalty, which sought to remove from the firm any profit it made from the advice. It noted that the uphold rate from FSCS in relation to the firm was 88%, and in 80 cases it made the maximum award available. FCA says that were it not for the compensation limit, £14.6m would have been payable.

FCA notes that around 30 investigations into firms and individuals relating wholly or partly to BSPS advice are all at a very advanced stage and some are in litigation.