Financial advisers should be given more protection against negligence claims if proposed new regulations come into effect.
That is the call from two of the major trade bodies involved in the finance sector. The issue has arisen because the Financial Conduct Authority (FCA) is consulting on proposed changes to the pension transfer rules.
The FCA wants to extend its regulatory remit to cover transfers out of safeguarded defined benefit (DB) schemes into the more flexible defined contribution (DC) schemes.
Trade bodies like the Personal Finance Society (PFS) and the Association of Professional Financial Advisers (APFA) say that advisers need to be protected from claims by clients who act against their advice and then find themselves worse off financially.
It’s feared that even good advice could be seen as ‘enabling advice’ that could influence an insistent client to make a wrong decision. APFA Director General Chris Hannant said: “Enabling advice refers to an adviser processing a transaction despite advising against that course of action.”
It’s feared that a client may be tempted to make a claim against an adviser, even if that adviser had warned the client against making the wrong decision.
Mr Hannant said: “The FCA should make it clear that no liability would attach to advice which, although the recommendation might be against a DB to occupational DC transfer, acts as ‘enabling’ advice regardless.
The FCA must also give the advice industry greater certainty on where and how liability would attach for advice to ‘insistent clients’ who want to go ahead with a transfer against advice.
While we are confident that the advice industry will continue to rise to the challenges set in motion by the government’s pension reforms, investment in the retirement advice space is unlikely to happen without greater FCA clarity on the liability implications of the new pension transfer rules; this could potentially restrict consumer access to professional advice at a time when they need it more than ever.”
The FCA says it hopes to formalise its proposals by the summer.
We shall keep clients informed of developments.
Please contact us if you would like more information about the issues raised in this article or any aspect of professional negligence.