The firm, which is in administration, poorly advised people to transfer out of defined benefit (DB) pension schemes, including the British Steel Pension Scheme (BSPS), according to the regulator.

Arthur Cobill, an adviser at IFM, and William Hofstetter, one of its directors, have been banned from advising customers on pension transfers and pension opt outs.

Hofstetter has also been banned from holding any senior management function at a regulated firm.

Cobill and Hofstetter agreed to pay £120,000 and £40,000 respectively to the Financial Services Compensation Scheme (FSCS) to contribute to compensation for IFM’s customers.

The regulator said the firm operated a contingent charging model, which meant it only collected fees if customers transferred out of their DB pension schemes following the firm’s advice. This approach benefitted IFM, Hofstetter and Cobill but risked the long-term financial health and interests of their customers.

Customers transferring out of the BSPS were already in a ‘vulnerable position’ due to the uncertainty surrounding the scheme, the FCA noted.

Out of 307 IFM customers advised to transfer out of their DB pension scheme, 261 completed the process. Cobill advised 245 of those, including 198 members of the BSPS. Hofstetter was responsible for the compliance oversight.

Therese Chambers, joint executive director of enforcement and market oversight, said: ”Pensions are the safety net people spend their lives building. For many customers, their DB pension was their most valuable asset, and it was their only retirement provision other than their state pension.

“As experienced advisers, Mr Cobill and Mr Hofstetter, and IFM should have known better than to unravel this. It is only right that Mr Cobill and Mr Hofstetter contribute towards compensating those affected.”

The FCA has said the review will be “an important indicator of how firms are implementing the Consumer Duty”.

Our own research report, Life Beyond Work: The changing face of retirement suggests that many advisers recognise they may need to revise their approach to retirement advice but would value some clear direction from the regulator before doing so. It therefore seems inevitable the review will find some areas where change is needed.

I’m hopeful, perhaps even confident, that the regulator will recognise how challenging providing effective retirement advice is. It is almost certainly the most difficult financial planning problem, full of uncertainty and technical complexity.

See also: Advisers say economic climate prompting clients to change retirement plans

While there will always be room for improvement, it’s important that the FCA and industry can work constructively to ensure the supply of quality retirement advice is expanded, not constrained further. While retirement advice is important today, it’s set to become even more so for all involved.

Client needs in retirement are pretty consistent – to maintain their standard of living until they die and not run out of money. However, client circumstances are changing. The decline of defined benefit pensions means the next generation of retirees will be more reliant on retirement savings than the boomer generation.

Sandwiched between ageing parents and boomerang kids, many of today’s retirees also face greater demands on their wealth than their parents did. Add in more complex family structures and meeting those core client needs becomes even more difficult. Retirement advice will become even more complex and increasing its accessibility will be key.

Assets for clients who are approaching, at, or in retirement already constitute the majority of advised assets and almost certainly generate the lion’s share of adviser fees. The need for ongoing advice in retirement is, to my mind, indisputable, at least for clients who remain invested.

See also: Most investors not reviewing their pensions annually, research finds

Keeping clients on track against their retirement plan, helping them optimise their tax position, and navigating the inevitable bumps in the road are all value-added activities that merit an ongoing fee.

Demand doesn’t seem to be an issue either. Only 16% of advisers told us that attracting new retirement clients was a business challenge for them. With fee pressure mounting and challenges around the value of advice, retirement clients are likely to become even more important to adviser businesses and those that support them.

Success story

Effective and affordable retirement advice is also essential from a government perspective. The introduction of automatic enrolment has been a huge success by almost any measure. However, it can only achieve its policy objective of improving retirement living standards if participants have the right support when deciding how to access benefits.

Evidence to date suggests that many can and do make irrational decisions when accessing benefits, drawing too much income and/or paying too much tax. As pension pots grow, the importance of converting assets to sustainable income will increase. While the FCA’s recent thoughts on enhancing guidance may help people avoid some retirement mistakes they will not be a substitute for advice.

An effective and efficient retirement advice market is essential for all participants – clients, advisers, financial services firms, and government. To achieve this, we need to work together to take on the challenges of changing client circumstances and the more hostile market and economic environment that we’ve seen in recent years.

A pragmatic and constructive approach to developing the regulation of retirement advice is essential to achieving this and the FCA’s thematic review will set the tone for this important discussion. I hope the Easter Bunny doesn’t disappoint.

Richard Parkin is head of retirement at BNY Mellon Investment Management

Lewis has also been banned from holding any senior management functions in a regulated firm and must pay £26,800 to the FSCS while Jones must cough up £40,888 to the scheme to contribute towards the compensation owed to WWFS customers.

Between March and December 2017, WWFS (now in liquidation) provided unsuitable pension transfer advice based on the incorrect assumption that it would be in their customers’ best interests to transfer out of their secure defined benefit pension.

Jones advised 27 to 28 clients to transfer out of their DB pension scheme, 25 were members of the British Steel Pension Scheme (BSPS).

In total, £9,769,550 of pension funds were transferred to riskier defined contribution schemes.

Lewis was responsible for ensuring WWFS provided suitable advice which the FCA say he failed to do so.

To read more on this topic, visit: FCA bans adviser in regard to DB pensions transfers

The FCA intervened and stopped the firm from processing transfers for a further 141 customers who were all members of BSPS.

Had the regulator not intervened customers may have transferred out funds totalling £43,722,771.

Therese Chambers, joint executive director of Enforcement & Market Oversight, said: “Mr Lewis and Ms Jones performed a double act of carelessness and incompetence that put people’s hard-earned pensions at risk.

“They would have continued to provide bad advice to many more had it not been for the FCA’s timely intervention. People need someone they can trust to give them informed advice on their financial future – and it’s not these two.”

Published today (9 November) the document also revealed the levy in the Life Distribution & Investment Intermediation (LDII) class is set to rise to £140m in2024/25 – a near £40m increase from 2023/24.

This increase is a result of lower expected surpluses being carried forward from 2023/24 to 2024/25 than were carried from 2022/23 to 2023/24, the FSCS said. It also reported the LDII class is expected to receive £53m in provider contributions from other classes during 2024/25.

Compensation costs for this class are also expected to increase by £42m to £224m with the main factors behind this increase including processing additional DB pension claims following recent failures, potential new firm failures and a number of SIPP decisions expected in 2023/24 moving into 2024/25.

To read more on this topic, visit: UK firm declared in default in regard to pension advice

Simon Harrington, head of public affairs at PIMFA, told International Adviser that while it was disappointing that the levy was forecast to increase, the trade body wanted to highlight the relatively stable cost of compensation over the preceding years.

Harrington said: “Our view has always been that anyone who falls on the FSCS has received an outcome it would be better to have avoided in the first place and relatively stable costs of compensation at least indicate we are currently not seeing a significant rise in claims.

‘Barrier to growth’

“This will, of course, provide little solace to firms who are ultimately required to fund these compensation costs. The cost of funding the FSCS represents a very real barrier to growth for many firms and it remains the case that alternative funding models should be pursed in service of the polluter pays model that industry stakeholders and the FCA agree would be preferable.”

He added: “Our view continues to be that FCA fines should be used to fund compensation costs rather than being diverted to the Exchequer as this would be the purest distillation of a ‘polluter pays’ model.

“Going forward we are of course concerned about how long claims take to work through the system and the potential this may have to contribute to significant rises in the cost of funding the FSCS in future. We remain supportive of a broader review of how the FSCS functions and what protection should be afforded to UK consumers.”

Armin will also have to pay £200,000 to the Financial Services Compensation Scheme (FSCS) to contribute to redress due to his customers.

The FCA found that while running the now dissolved Retirement and Pension Planning Services Limited, was seriously incompetent when advising on defined benefit (DB) pensions transfers.

He had advised 422 customers on the transfer of their DB pensions which included 183 members of the British Steel Pension Scheme (BSPS), 174 of whom transferred out of the scheme following Armin’s recommendation.

To read more on this topic, visit: FCA bans adviser for failures in advice given to BSPS members

These fees added to £2.2m for all DB transfer advice, 55% (approximately £1.2m) of which was retained by Armin and the firm.

The regulator reported that Armin repeatedly failed to obtain the necessary information he needed to assess the suitability of a pension transfer and provided unsuitable advice as a result.

In some cases, Armin only informed customers of the consequences of giving up the valuable guaranteed benefits offered by their DB pension after they had already transferred out of the scheme.

To date, the FSCS has paid out £3,961,517 in compensation to Armin’s customers.

Theres Chambers joint executive director of enforcement and market oversight at the FCA, said: “Armin gave bad advice and pocketed large fees for doing so. People rely on the advice they’re given for financial security into old age. Armin’s advice not only put at risk the pensions people had worked for, it also eroded the trust between advisers and clients. Such callous incompetence has no place in financial services.”