The UK Financial Conduct Authority (FCA) has fined Inspirational Financial Management Ltd (IFM), which is in administration, £897,840.
The IFM was under-advising people to transfer non-defined benefit (DB) pension schemes, including the British Steel Pension Scheme (BSPS).
Arthur Cobill, a consultant at IFM, and William Hofstetter, one of its directors, have been banned by the FCA from advising clients on pension transfers and pension exemptions. Mr. Hofstetter is also prohibited from holding any senior management position in any regulated company.
Mr Cobill and Mr Hofstetter agreed to pay £120,000 and £40,000 respectively to the Financial Services Compensation Scheme (FSCS) to help compensate IFM clients.
Between 8 June 2015 and 22 December 2017, IFM provided inappropriate pension transfer advice and failed to properly consider whether it would be in clients’ best interests to transfer their secure DB pensions. The company used a contingent fee model, only charging fees if customers exited their DB pension plans following the company’s advice.
While this approach benefited IFM, Mr. Hofstetter and Mr. Cobill, it jeopardized the long-term financial health and interests of their clients. A review by the FCA found that 83% of IFM’s pension transfer advice failed to comply with the minimum standards required and clients were at risk of financial loss as a result of the poor advice they received.
Of the 307 IFM clients advised to transfer out of their DB pension scheme, 261 completed the process. Mr Cobill briefed 245 of them, including 198 BSPS members. In total, the BSPS members advised by Mr Cobill had pension benefits worth more than £90 million.
Mr Hofstetter was responsible for overseeing the compliance of IFM’s pension transfer advice process.
Customers moving out of the BSPS were already in a vulnerable position due to the uncertainty surrounding the future of their pension scheme, so it was critical that they received good advice.