The Financial Services Authority (FSA) has today imposed a public censure on a Derbyshire financial advice firm for failing to ensure its advice on pension income drawdown products was suitable.
The problems at Cheshire Life & Pensions Consultants (Cheshire) were picked up last year by an FSA team conducting a visit focused on treating customers fairly as part of the FSA’s enhanced supervisory strategy for small firms.
Lesley Titcomb, FSA director for small firms, said:
“This is the first enforcement case arising from our small firm assessment programme on the fair treatment of customers. This public censure puts advisory firms on clear notice that they must have the right arrangements in place to ensure that suitable advice is given and recorded for investment products such as income drawdown. We will continue to identify firms who fail to treat their customers fairly through our small firms assessment programme and other work and we will take action where necessary. This can and will include enforcement action and sanctions where appropriate.”
The FSA investigation found that Cheshire had breached Principle 9 for businesses by failing to:
- Gather or record adequate information about customers’ personal and financial circumstances to support its assessment of suitability
- Adequately explain the reasons for the recommendation made in the suitability reports
- Include adequate risk warnings in suitability reports about the recommended product
- Undertake sufficient research to ensure the suitability of recommendations;
- Undertake adequate monitoring to ensure suitability of advice and compliance with regulatory requirements.
The FSA has also required Cheshire to write to all its income drawdown customers, undertake a past business review and use an external compliance specialist to provide on-going advice and oversight.
