The U.K. Financial Conduct Authority (FCA) fined a financial advice firm nearly 900,000 pounds (U.S. $1.1 million) regarding alleged failures in advice and oversight provided to customers who were primarily members of the British Steel Pension Scheme (BSPS).

Inspirational Financial Management (IFM) “poorly advised people to transfer out of defined benefit pension schemes,” the FCA announced in a press release Monday.

Arthur Cobill, an adviser at IFM, and William Hofstetter, one of its directors, agreed to pay £120,000 (U.S. $153,000) and £40,000 (U.S. $51,000), respectively, to contribute to IFM customer compensation and be banned from advising customers on pension transfers and opt outs. With IFM under administration, preference will be given to creditors to maximize funds available for redress, the FCA added.

The BSPS was restructured in 2017, with around 8,000 members then transferring out. The FCA probed the matter and determined nearly half the members received unsuitable advice. It has since disciplined more than a dozen firms and advisers found to be responsible.

The details: From June 2015 to December 2017, IFM provided “unsuitable pension transfer advice and failed to properly consider whether it would be in customers’ best interests to transfer out,” the FCA alleged.

An agency review found 83 percent of IFM’s pension transfer advice failed to comply with minimum regulatory standards, according to its final notice.

The firm only collected fees if customers transferred out of their pension schemes following the firm’s advice, which allowed Cobill to collect more than £900,000 in income during the relevant period, per the FCA’s final notice against him. Customers advised by Cobill had pension benefits totaling more than £90 million (U.S. $115 million).

Compliance considerations: Hofstetter was responsible for the compliance oversight of IFM’s process for pension transfer advice but failed to “establish adequate systems and controls … to ensure such compliance,” the FCA’s final notice against him stated.

Instead, IFM relied on the experience of Cobill as its sole pension transfer specialist, with certain compliance checks and reviews conducted by administrative staff who were “not qualified advisers or compliance experts,” the FCA alleged.

Hofstetter received a reduced penalty for agreeing to settle at an early stage, the FCA noted. The regulator originally imposed a penalty of £1.1 million (U.S. $1.4 million) against Cobill to account for the income accrued during the relevant period, but it was reduced because of significant liability for redress.

IFM did not respond to a request for comment.

Jeff Dale is Managing Editor, Editorial Projects and Analytics, at Compliance Week. He previously served as Compliance Week's Digital Editor and has worked as a copy editor at the Boston Herald and city editor at The Hour Publishing Co. in Norwalk, Conn.View full Profile

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