FSA fines two firms for client advice failings

FSA - Cracking the Whip on Erring Firms

FSA – Cracking the Whip on Erring Firms

Two firms – Perspective Financial Management (PFM) and Cricket Hill Financial Planning, were fined a combined amount of £143,000 for giving pension switch advice without checking suitability first.

FSA fined the Milton Keyes based PFM £49,000. According to FSA, the misconduct took place before PFM was taken over by Perspective Financial Group in 2008.

The punishment for the Bernsley based Cricket Hill was harsher with the FSA imposing a fine of £70,000. The FSA publicly censured its compliance officer and imposed an additional fine of £24,500 on Director Jeremy Sheard.

In its indictment, the FSA said that Cricket Hill had ‘significant problems’ with its sales process and advisory services.

FSA has accused the firm of regularly recommending customers to switch to a pension risk management service without checking alternatives first. Since most of its customers were not sophisticated and had a smaller pension amount, the firm should have checked the suitability first, said FSA.

FSA further accused Cricket Hill and Sheard of failing to manage conflict of interest, since Sheard owned shares of the risk management company his advisors were directing customers to. However, the regulator found no evidence that the risk management company paid any money or dividend to Cricket Hill, its employees or shareholders.

Cricket Hill did not keep adequate records of the customer’s existing pension plans, their needs and objectives, and neither monitored the advisers’ pension switch advice.

PFM recommended switching to new schemes when they were almost similar to the customer’s existing plan. In five out of nine cases it reviewed, the FSA found that the customers incurred unnecessary costs without any additional benefits.

“Pension switching is a complex area and any adviser recommending a change of provider must be able to demonstrate that this advice is suitable.

“Firms that fail to do this put customers at risk of being worse off due to exit penalties applied to their existing pension and higher charges on the new pension”, said Margaret Cole, FSA Enforcement and Financial Crime division managing director.

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