LONDON (Reuters) – Britain’s markets watchdog told financial advisers on Tuesday they face a two-year crackdown to stop unsuitable advice, investment scams and excessive fees.
The Financial Conduct Authority (FCA) said in a “Dear CEO” letter to heads of financial advice firms it regulates that the sector has a valuable role to play.
“However, we are seeing an increasing number of cases where the actions of firms are resulting in significant harm to consumers’ financial well-being,” Debbie Gupta, the FCA’s director of financial advice supervision, said in the letter.
“There will be increased focus on these areas as part of our wider supervision of firms over the next two years.”
Mark Turner, managing director of compliance at financial services firm Duff & Phelps, said it was clear the FCA wanted advisers to take action immediately.
“This is a far-reaching letter…reminding them of the important role they play in advising consumers on arguably the most important and significant financial decisions of their lives,” Turner said.
The FCA said it would review initial and ongoing advice to consumers on taking an income in retirement.
“You need to ensure the advice you provide is suitable, costs and charges are disclosed clearly, and you act in the best interests of your clients,” Gupta said.
Consumers in Britain have been given “freedoms” to cash in their pensions.
Lawmakers have said the FCA was too slow in 2017 in stopping steelworkers in Wales being ripped off by advisers over critical pension decisions.
“Consumer protection at and in retirement continues to be a significant challenge for the FCA in the post-pension freedom world,” said Tom McPhail, head of policy at Hargreaves Lansdown, a funds supermarket.
The FCA said it expected advisers “to start from the assumption that a pension transfer is not likely to be suitable for your client”.
It said that some financial advisers have inadequate resources and professional indemnity insurance, meaning they may not be able to compensate customers when things go wrong.