In January 2013 the Regulator outlined concerns about firms failing to fully assess the advantages and disadvantages of the underlying investments held within SIPP wrappers. Following this initial alert the FCA has carried out further supervisory work which has continued to ‘identify serious and ongoing failings’.
The findings can be read here.
Briefly the supervisory work found:
- ‘Very poor standards of advice’ i.e. lack of an assessment of customers overall financial position, needs, ATR and objectives;
- Lack of understanding of non-mainstream propositions;
- Firms were not assessing the suitability of the underlying assets held within a SIPP;
- Underlying assets that were not suitable for a customer meaning that the overall advice was unsuitable;
- Firms were still restricting advice just to the SIPP wrapper and not the overall transaction (this was after the FCA had issued their alert in January last year);
- Retail clients with very little investment experience were transferring traditional pension plans into non-mainstream, often unregulated, investments;
- Some firms business models treated all clients as insistent or were seeking an execution-only service to avoid compliance requirements;
- Some firms advised customers to take out SSAS in an attempt to avoid FCA scrutiny unaware that any advice to switch or transfer a pension is a regulated activity;
- Many firms professional Indemnity insurance was inadequate.
Non-Mainstream Investments are:
Pooled investments or ‘funds’ characterised by unusual, speculative or complex assets, product structures, investment strategies and/or terms and features. They are units in unregulated collective investment schemes (UCIS); securities issued by certain special purpose vehicles (SPVs); units in qualified investor schemes (QIS); and traded life policy investments (TLPIs).