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FCA investigating Quilter subsidiary over DB pension transfers

UK regulator also orders firm to appoint skilled person to conduct review

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Financial services giant Quilter has confirmed that its advice subsidiary Lighthouse is currently being investigated by the UK financial watchdog over legacy defined benefit (DB) pension transfers.

This comes after the Financial Conduct Authority (FCA) said it is carrying out 30 enforcement investigations, arising from concerns identified in the course of its DB transfer market review.

Quilter said in a statement on the London Stock Exchange on 5 June: “The FCA is investigating whether Lighthouse has breached certain FCA requirements in connection with advising on and arranging DB pension transfers in the period from 1 April 2015 to 30 April 2019.”

The firm said in its Q4 2019 results that it had put £12m ($15.2m, €13.5m) aside to cover potential costs of DB cases from the business it acquired in June 2019.

Skilled persons review

Quilter also confirmed that the FCA has ordered Lighthouse to appoint a skilled person under section 166 of the Financial Services and Markets Act 2000 to conduct a review of certain DB pension transfers advised on or arranged by Lighthouse in the period from 1 April 2015 to 27 January 2020.

“The FCA investigation and skilled person review only relates to Lighthouse,” Quilter said in the statement. “The period of the FCA’s investigation covers the period before the Lighthouse acquisition and the period of the skilled person review covers the period before the Lighthouse acquisition up until 27 January 2020.

“That is the date on which Lighthouse’s internal processes in relation to DB pension transfers were fully replaced by those of Quilter Group following completion of the Lighthouse acquisition.

“The company and its subsidiaries, including Lighthouse, are fully co-operating with the FCA in relation to the investigation and skilled person review and the company will update the market on the outcome of the investigation and review in due course.”

DB history

Prior to its acquisition in June 2019, Lighthouse advised around 300 British Steel Pension Scheme (BSPS) members to undertake a DB transfer.

Of this sum, approximately 80 were carried out prior to June 2017, after which the transfer values of the pension scheme were fundamentally enhanced.

As of 11 March 2020, Quilter said it was notified of around 30 complaints relating to advice provided by Lighthouse, all of which related to the pre-June 2017 period.

During its results, the UK firm said it was in the process of reviewing these complaints “to assess the standard of advice given to British Steel Pension Scheme members” and was actively engaged with the regulator.

The firm said at the time it had written directly to the customers involved.

Contingent charging

In a bid to revamp the DB transfer market, the FCA announced on 5 June 2020 that it was banning contingent charging in most circumstances, with only a few consumers exempted, such as those suffering from serious ill-health or experiencing serious financial hardship.

In the minority of cases where contingent charging is permitted, advice firms will have to charge the same sum, in monetary terms, for advice to transfer as they charge when the advice is non-contingent.

The ban will come into effect on 1 October 2020.

Also, it will also implement proposals allowing advisers to provide an abridged advice process, which will help consumers access initial advice at a more affordable cost.

The abridged process “can only result in a recommendation not to transfer or a statement that it is unclear whether a consumer would benefit from a pension transfer without giving full advice”, the FCA stated.

Warm welcome

Quilter said that it supports the FCA’s decisions to address weaknesses in the DB transfer market.

“The proposal to ban contingent charging coupled with the introduction of an initial abridged advice process is a welcome move, which will provide clarity around charging, while ensuring DB transfer advice is focused on the cases where such advice is more likely to be suitable,” Quilter added.

“Abridged advice is a similar concept to the feasibility service already undertaken by the Quilter Group companies at the outset of a DB transfer advice process.”

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