Financial watchdogs are cracking down on UK based IFAs who are outsourcing to unauthorised advisers to switch pension companies for clients.
The Financial Conduct Authority (FCA) has accused several IFAs of requesting unregulated advisers to transfer pensions into self-invested pension plans (SIPPS) or Qualifying Recognised Overseas Pension Scheme (QROPS).
In some cases, the investment risk was unsuitable for the customer.
British IFAs have a duty to explain QROPS to UK clients who have expressed an intention to move overseas in the future.
Unsuitable pension advice
To work around this, the work is outsourced, generally without the client’s knowledge, to a third party.
According to the FCA, some of these third party advisers are not authorised to handle pension transfers and have given unsuitable advice.
The FCA has warned that some of the cases are under investigation by enforcement officers and that British firms could not escape liability or regulatory action if these third parties had given improper advice.
A warning to IFAs has been sent out by the FCA, along with a plea for firms to pass on the details of any third parties asking to make delegation arrangements for pension transfers.
The FCA also explained that IFAs could outsource services for clients, provided the third party was regulated and authorised in the UK.
Check out your pension adviser
“Good pension advice safeguards consumers from frauds, scams and the risk of making unsuitable investments,” said an FCA spokesman.
“That’s why we insist advisers are qualified and regulated to give the advice they do.
“Letting an unauthorised third party carry out this work has serious regulatory implications.”
The FCA added that the unauthorised firms said that they were financial advisers and received cases to review from IFAs. They did not contact the consumers but worked off their files and in many cases; their recommendations were not reviewed by the IFA referring the case.
Anyone transferring a pension is advised to ask their IFA whether they will conduct the review in-house or through a third party.
If the review is by a third party, then check out their regulatory status on the FCA web site