On 3 February, deVere UK was ordered to “immediately cease” providing third-party companies with transfer value analysis reports as the FCA issued a section 166 or ‘skilled person review’ into the company.
Section 166
Section 166 gives the regulator the power to get a third-party view “about aspects of a regulated firm’s activities” if they are concerned or want further analysis.
Davies, whose firm specialises in providing advice to expats moving overseas, told International Adviser that the FCA only issue a section 166 when it has “well-founded concerns”. He added that other firms would soon face similar measures.
“I would say 99% of all overseas pension transfers should be investigated,” he said. “The FCA is seriously restricted about what it can do about overseas advisers but it can always cut off the blood supply for final salary pension transfer advice by stopping UK firms from delivering this advice if they have concerns about their processes.”
He added that it would be “wrong to speculate” on the outcome of the deVere UK review.
However, he noted it would be unusual for the independent ‘skilled professional’ leading the investigation to conclude contrary to the FCA’s concerns.
‘Just the beginning’
“This is just the beginning of what we see as a new era in regulatory oversight,” said Davies, who urged the watchdog to “interrogate” everyone who has been advised on defined benefit (DB) transfers overseas.
“The FCA needs to look into all UK advice firms with a financial interest in an overseas financial services business to see whether they are simply operating a sausage machine,” he said.
In January, the UK regulator issued a stark warning to firms advising on domestic and international pension transfers following reports that clients were being scammed or have had their funds transferred into unsuitable investments.
Pension scams
One industry source told IA that the FCA had been looking into more than one international financial advisory firm offering UK overseas DB pension transfers via Dubai.
In one instance, a client was reportedly offered an offshore pension scheme where the funds were to be invested in a portfolio of low-cost ETFs. Instead, the money was invested in a Mauritius-based fund that paid high upfront indemnity commission.
There has also been speculation that the FCA is considering a thematic review into DB transfer advice, including international pensions. The FCA declined to comment when asked about this.
Unregulated firms
Christopher Lean, a Czech-based financial planner with Aisa International, said he is more concerned about unregulated international advisers, who approach FCA-registered advisory firms to sign off third-party overseas transfers.
“If they’re going to look at deVere they should look at everybody. Before signing-off these transfers for a third party, the UK adviser should actually speak to the client and find out where the money is being invested,” he told IA.
DeVere must “explain where the money went and where it is now invested”, said Lean, given the company transferred the funds via one of the 50 offshore offices listed on its website.
David White, partner at The Qrops Bureau, an independent consultancy specialising in offshore pensions, said the FCA warning on pension transfers was prompted by the UK pension freedoms, introduced in April 2015.
White, Davies and Lean agree that, in recent years, there has been a “commoditisation” of Rops – the most popular form of overseas pension.
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