The Financial Conduct Authority has imposed fines of more than £500,000 on two advisers, and banned them from working in financial services, after they offered flawed advice on DB transfers.
As a result of their actions more than £126m was transferred out of guaranteed DB schemes, which the FCA concluded was against the client’s interests in the majority of cases.
Richard Fenech was the sole director of Financial Solutions Midhurst Limited (FSML) and who was responsible for overseeing Heather Dunne, the firm’s appointed representative, trading as HDIFA.
Fenech was fined £270,646 and Dunne £399,817. The FCA said Dunne failed to act with due skill, care and diligence when providing pension transfer advice. In its published judgement the FCA said Dunne failed to take into account the destination of the customers’ investments when advising whether DB transfers were suitable.
The FCA said this was due to a “flawed two-adviser advice model” where Dunne provided the pension transfer advice and another firm the investment advice once the transfer had concluded. The FCA said that as a result Dunne did not know where her clients’ money was going when offering her advise, leaving customers exposed to the risk of unsuitable pension transfers.
Dunne advised approximately 92 per cent of her clients to transfer out of their DB pension schemes.
Fenech was responsible for the oversight of HDIFA’s business. However, despite being made aware by FSML’s external compliance consultant of the risk arising from HDIFA’s use of the two-adviser advice model, Fenech did not stop HDIFA from operating it.
The FCA said he also failed to ensure that Dunne’s pension transfer advice complied with regulatory standards. The FCA added that Fenech and Dunne also failed to act with integrity because of their involvement in the dishonest provision of a backdated appointed representative agreement to the FCA.
Therese Chambers, joint executive director of enforcement and FCA market oversight says: “People must be able to trust the advice they receive about their pension. The actions of these individuals are wholly unacceptable, as they exposed customers to significant financial risk.
“Both demonstrated a complete disregard for customers’ needs through retirement, and the suitability of pension transfers, so it is right we ban them from the industry.’
The FCA has decided to fine Fenech and Dunne and ban them from working in financial services. Both Fenech and Dunne have each referred their decision notice to the upper tribunal for review.
The FCA added that Dunne’s fine was reduced from £494,917, having shown this amount would cause her serious financial hardship.
FSML and HDIFA are both now in liquidation. To date, the Financial Services Compensation Scheme (FSCS) has paid over £770,490 in compensation to FSML clients, with potential total losses estimated at nearly £2m, because of losses suffered by those clients following advice they received.
