FCA fines brokerage £2.4m over unsuitable advice

The FCA has fined Pembrokeshire Mortgage Centre (PMC), trading as County Financial Consultants, £2,354,331 for giving unsuitable advice to consumers to transfer out of the British Steel Pension Scheme (BSPS) and other defined benefit pension schemes.

The brokerage advised 420 consumers, nearly two-thirds of whom were BSPS members, on whether to transfer out of their DB scheme. Overall, 93% were advised to transfer. PMC earned over £2 million in transfer and ongoing advice fees.

Many of the people advised were in a vulnerable position due to the uncertainty surrounding the future of BSPS and the short timescale they had to make a decision. However, the FCA says they did not receive the quality of advice they needed to make an informed decision.

Its investigation found that PMC gave unsuitable advice in 60% of cases, even higher than BSPS as a whole.

The failings included the provision of generic suitability reports that were not tailored to the circumstances of individual consumers and contained contradictory, misleading and confusing statements. PMC also failed to have adequate resources to deal with the increase in cases caused by BSPS, further impacting the quality of advice provided.

Many consumers were advised to transfer out even though they were relying on the guaranteed income to fund their retirement and could not afford to bear the risk of transferring out. This included those who needed the money to provide for dependents needing long-term care.

PMC is currently in liquidation. The FCA will give preference to creditors (some of whom may be consumers), ahead of its financial penalty, to maximise funds available for redress.

The FCA continues to progress around 30 ongoing enforcement investigations into firms and individuals relating wholly or partly to BSPS advice, all of which are at a very advanced stage and some are in litigation.

Mark Steward, executive director of enforcement and market oversight at the FCA, said: "Pembrokeshire Mortgage Centre advised hundreds of consumers to give up valuable defined benefit pensions without any adequate justification or rationale, using generic, templated advice not tailored to the specific circumstances of their customers while earning fees in doing so.

"The quality of advice seen here was woeful. The failings were particularly egregious in the context of the British Steel Pension Scheme, where customers were in an unusually vulnerable position. The FCA’s investigation into the involvement of others in these matters remains ongoing.

"Any consumers who were advised to transfer should contact the Financial Services Compensation Scheme to see if they are owed redress."