Fined SIPP adviser pushed same plan to 96% of clients

The FCA has fined Pembrokeshire Mortgage Centre Limited (trading as County Financial Consultants) £2,354,331 for providing "woeful" and unsuitable advice to consumers to transfer out of the British Steel Pension Scheme (BSPS) and other defined benefit (DB) pension schemes. The total value of the transferred funds on which PMC gave advice was approximately £123m, with an average transfer value per customer of approximately £293,000 (£314,000 for British Steel Pension Scheme members). PMC earned over £2m in transfer and ongoing advices fees by advising 420 consumers on transfers. PMC used similar wording across its Suitability Reports provided to customers and recommended the same SIPP product to 96% of its British Steel Pension customers, the FCA Decision Notice said. Nearly two-thirds of customers were BSPS members seeking advice on whether to transfer out of their DB scheme. Overall, 93% were advised to transfer. Pembrokeshire Mortgage Centre Limited is now in liquidation which means it is likely that much of the cost of meeting claims will fall on the Financial Services Compensation Scheme. The overall FSCS uphold rate in relation to Pembrokeshire Mortgage Centre so far has been 88%. In 80 cases (38%), the FSCS awarded the claimant the maximum compensation available of £85,000. Had it not been for the FSCS compensation limit of £85,000, the total compensation payable to customers would have been approximately £14.6m, the FCA said. The regulator said that most of the people advised were in a “vulnerable position” due to the uncertainty surrounding the future of BSPS and the short timescale they had to make a decision. However, they did not receive the quality of advice they needed to make an informed decision. Customers of the firm needed clear, objective and expert advice, the FCA said. Instead, PMC gave unsuitable advice in 60% of cases, even higher than BSPS cases as a whole. Mark Steward, executive director of enforcement and market oversight, said: “Pembrokeshire Mortgage Centre advised hundreds of consumers to give up valuable defined benefit pensions without any adequate justification or rationale, using generic, templated advice not tailored to the specific circumstances of their customers while earning fees in doing so. "The quality of advice seen here was woeful. The failings were particularly egregious in the context of the British Steel Pension Scheme, where customers were in an unusually vulnerable position. The FCA’s investigation into the involvement of others in these matters remains ongoing. “Any consumers who were advised to transfer should contact the Financial Services Compensation Scheme to see if they are owed redress.” PMC failings included the provision of generic suitability reports that were not tailored to the circumstances of individual consumers and contained “contradictory, misleading and confusing statements.” PMC also failed to have adequate resources to deal with the increase in cases caused by BSPS, further affecting the quality of advice provided. Many consumers were advised to transfer out even though they were relying on the guaranteed income to fund their retirement and could not afford the risk of transferring out. This included those who needed the money to provide for dependents needing long-term care. The FCA said its view was that most people should keep the guaranteed income provided by a DB pension. FCA said it would give preference to creditors (some of whom may be consumers), ahead of its financial penalty, to maximise funds available for redress. The FCA says it is continuing to investigate about 30 enforcement investigations into firms and individuals relating wholly or partly to BSPS advice. All cases are at a very advanced stage and some are in litigation. On 28 November the FCA published final rules for a redress scheme for former members of the BSPS who received unsuitable advice to transfer out of their DB scheme.