Ill-advised Switching of Pension Funds Leads to Advisers’ Dilemma

Jack Humphrey, Regulatory journalist
February 17, 2011 /

Two firms have received final notices from the Financial Services Authority (FSA) seeking a total of £143,500 in fines for failing to monitor the advice they each gave to customers in pension funds switching.

The FSA, which dealt out the largest penalty of £67.7 million to Barclays PLC on January 18 for its failure to advise customers on the sale of funds, has fined Perspective Financial Management (PFM), based in Milton Keynes, with £49,000 and Barnsley-based Cricket Hill Financial Planning Ltd (Cricket Hill) with £70,000.

Cricket Hill’s director Jeremy Sheard was also ordered to pay £24,500 while his colleague Mark Kelsey received a public censure.

Cricket Hill allegedly kept advising its customers to switch to a “pension fund risk management service without sufficiently researching alternative products.”

The FSA also claimed conflict of interest on the part of Sheard who owned shares of the same pension fund risk management but failed to disclose it.

The risk management service firm did not issue dividends to shareholders of Cricket Hill, the FSA said.

On the other hand, Perspective Financial Management allegedly gave unsuitable pension funds switching advice to its customers, according to FSA’s investigation into five out of nine cases.

The FSA said PFM’s customers had “incurred unnecessary costs” when they were made to switch to the pension funds which were not different from their existing scheme.

An investigation showed that PFM’s customers have been unable to decide wisely on whether to switch pensions due to the company’s failure to provide enough information about the costs of “ discretionary fund management” associated with the new pension.

“Firms that fail to [make suitable advices] put customers at risk of being worse off due to exit penalties applied to their existing pension and higher charges on the new pension,” Margaret Cole, managing director of the FSA’s enforcement and financial crime division, said.


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