The potential risk, damage and “serious implications” that could result from making such agreements has been outlined to companies today in a stark warning from the regulator.
In a notice published this morning, officials said: “If approached in regard to this type of activity, we urge authorised firms to consider the significant implications that entering into this type of arrangement could have on their professional reputation and future livelihood.
“If you are approached and you take on business in this way, it may create a significant risk to your business model and may affect your professional indemnity insurance.”
The FCA said: “Some financial adviser firms and associated individuals have been referred to our Enforcement Division because they may have breached the FCA’s requirements in relation to the advice provided to customers.
“Retail consumers had been recommended to switch their mainstream personal pensions into Sipps with underlying high risk assets that may have been unsuitable for the customer. This had been done through an improper delegation of regulated advice to unauthorised firms or individuals associated with the underlying assets.
“Firms need to be aware that, while it is attractive to develop new business models, improper delegation of authorised activities may carry significant risks of poor consumer outcomes. Delegating regulated advice to an unauthorised party will not mean that the firm can avoid liability or regulatory action for unsuitable advice.”
Officials said it was “essential at all times” that advisers “maintain ownership of the advisory process between themselves and their client” – as described in the handbook.
Advice on pension switching can play a vital role in helping people make informed decisions about their retirement savings, and may protect them from the irreversible losses of pension fraud and scams, officials said.
The warning notice encouraged firms to “contact us if they are approached by entities with a view to entering into the sort of arrangements described in this notice”.