When financial historians come to write a chapter about the debacle of the UK’s steel pension system, the word ‘shameful’ is likely to be used.
Years after the worst case of the worst advice, for the first time, we can see the true extent of the shameful practice that left hundreds of workers out of bad advice.
Advisors have been accused of “incompetence” by the FCA in two cases this week.
It’s truly unbelievable how they managed to collectively provide gruesome, substandard advice to hundreds of clients. But they are not the only ones to blame. Pension companies, SIPP providers, regulators, and other businesses must have had a few people who slept on the job. He has one unanswered question, who checked that advice?
I’m sure some of you have seen dozens of bad transfer advice and turned a blind eye.
Two lawsuits decided by the FCA this week are notable. These lawsuits shed light on some of the unfair selling that so many BSPS workers have suffered, many of whom fear losing all or part of the pensions they have worked for for many years. . for.
In the first case, the FCA banned County Capital Wealth Management’s Mark Avery and ordered him to pay £106,100 to the Financial Services Compensation Scheme.
The FCA said his firm in County Durham, now in liquidation, has advised about 600 people, including about 150 members of BSPS, to leave the defined benefit plan. Regulators said the advice given in 56% of cases did not meet the required standards, demonstrating incompetence.
As of 14 March, the FSCS had granted CCWM 53 pension transfer claims and paid over £2.1m in compensation to CCWM clients.
In another case, financial adviser Dennis Lee Morgan was banned by the FCA from advising and opting out of pension transfers this week after his advice to the UK Steel Pension Scheme failed. Morgan, of Pembrokeshire Mortgage Center Limited (in liquidation), was also barred from holding senior management positions in regulated companies.
Astonishingly, his company was advising an average of 65 customers a month, mostly BSPS members, on pension transfers. Overall, the company advised him to remit a staggering £123m annuity transfer, with an average remittance per customer of him £293,000 (for UK Steel Pensioners he was £314,000). )was.
In most cases, the company did not consider the client’s financial situation, retirement needs, risk attitude, or whether the move was in the client’s best interest.
Mr Morgan personally received £1,368,608 in initial and ongoing advice fees, and the FCA said in its final notice that “a significant portion of Mr Morgan’s gross income from advice was due to his breach”. .
No wonder the Pembrokeshire Mortgage Center was fined £2.354 billion in December for improperly advising clients to withdraw from BSPS and other defined benefit pension schemes.
Overall FSCS support for claims against Pembrokeshire Mortgage Center was 88%. FSCS has so far granted 213 claims against the company and paid more than £13.3m in damages. FCA said without the FSCS coverage limit of £85,000, the total compensation paid to customers would have been £16.4m.
It’s easy to talk about numbers in cases like this, but we have to keep in mind that each victim would have been traumatized by the whole experience. I don’t even know if there is a pension that I can rely on in my old age. A nightmare scenario. The only consolation is that at least government-backed BSPS relief schemes, FSCS, and others are returning much of the lost money to BSPS members.
Ironically, as the FCA highlighted this week, the root of the problem in these incidents was the incompetence of advisers. They shouldn’t have been allowed to advise on pension transfers in the first place. Allowing this is a catastrophic regulatory mistake, and the industry has paid both reputational and financial costs.
Lessons from this shameful time must be learned if the next chapter in the history of the advice industry is not to be similarly grim.
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Kevin O’Donnell is the editor of Financial Planning Today, where he has worked as a journalist and editor for over 30 years.