Annuity Panel Referrals

Many independent advisory firms refer their clients to guidance only (non-advised) annuity firms as it is often in their clients’ best interests to do so.  For example the pension fund available to purchase the annuity may be too small for the advisory firm to ethically charge their minimum fee as, relatively speaking, it would be excessive.  Another reason is that the annuity firm is likely to have negotiated enhanced rates based on volume with the providers that again could benefit the client.

We have been in direct communication with the FCA regarding this type of referral and asked the question as to whether an independent adviser would compromise their independence if they referred to an annuity firm offering only a restricted panel of providers.

The FCA explained that “an independent adviser could potentially refer a client to a restricted annuity panel without undermining their independence status if the referral was not part of a personal recommendation”.

Of course, the referral would have to be in the client’s best interests.

They were however concerned that the independent adviser may receive an introductory commission for referring a client in this way (i.e. to any type of guidance only annuity service). The FCA said: “Such an arrangement is not in the spirit of the RDR and has the potential to lead to poor consumer outcomes”.

Remember; “An ‘independent’ adviser must ensure that they really do act as such and are genuinely free from influence or restriction on what they can and do recommend.” Independent advice should be fair, unbiased, unrestricted and comprehensive.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

Our View

If you operate in these markets the FCA has given us a clear indication of their expectations which should be followed by all firms.  

Action Required By You

  • We strongly recommend you review your internal systems to ensure all of the points raised are being addressed;
  • Discuss the issues raised above with the senior management team and document the discussions and outcomes;
  • Ensure all advisers and staff involved in these areas are aware of the content of this Newsletter;
  • Discuss findings with your ATEB consultant.
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About the Author

Steve is an ATEB Director and has a deep understanding of all matter regulatory, built up over his 30 years + in the industry. With a training background and a technical brain, he overseas numerous complex projects and client implementation work.

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