FSA has fined a wealth management firm £1.12 million for failings in its pension transfer, pension annuity and income withdrawal business. FSA estimated the failings meant:

  • 800 customers may have had unsuitable advice in relation to 1,200 sales over 18 months, because the firm recommended pension transfers and annuities to customers who either had suitable existing policies or whose attitude to risk did not match the products it recommended; and
  • it sometimes did not disclose the risks and costs of products, and its records could not show it gave suitable advice in 39% of transactions FSA reviewed. FSA found 28% of recommendations in a sample of transactions resulted in mis-sales.

FSA found the firm breached Principles 3 and 9 and, in consequence, did not treat its customers fairly. It was concerned about:

  • lack of training and monitoring performance of sales advisers;
  • lack of effective compliance checking and information gathering systems that should have identified unsuitable advice; and
  • inadequate controls and inappropriate incentives for the sales force, which did not ensure they followed processes and gave suitable advice.

The failings happened across products and branches. The firm's actions were particularly worrying because of its size and market share, because FSA had regularly told the pensions sector of the need to ensure suitability and because the failings continued after both FSA and the firm's compliance consultant noted them.

The firm carried out many remedial measures and has started a plan to review all business during the relevant period and it intends to pay any compensation due to customers by August 2009. Were it not for this the fine would have been even higher. FSA says the sanction should deter the firm and others from committing similar breaches and should show the benefits of a compliant business.