FCA Imposes Fines on IFM for Poor Advice on British Steel Pension Scheme Transfers

The Financial Conduct Authority (FCA) has fined financial advice firm Independent Financial Management Limited (IFM) for inadequately advising clients, including those associated with the British Steel Pension Scheme (BSPS), to transfer out of defined benefit (DB) pension schemes. The FCA has also banned Arthur Cobill, an adviser at IFM, and William Hofstetter, one of its directors, from advising on pension transfers and opt-outs. Additionally, Mr. Hofstetter has been prohibited from holding any senior management function at regulated firms.

IFM's shortcomings in advising clients to transfer out of DB pension schemes, particularly the BSPS, led to the regulatory actions. Between June 8, 2015, and December 22, 2017, IFM provided unsuitable pension transfer advice and failed to adequately consider whether transferring out of secure DB pensions was in the best interests of its customers. IFM operated on a contingent charging model, collecting fees only if customers followed through with the recommended pension transfers. This approach, while financially beneficial for IFM, Mr. Hofstetter, and Mr. Cobill, posed risks to the long-term financial health and interests of their clients.

The FCA's review revealed that 83% of IFM's pension transfer advice did not meet the minimum required standards, putting customers at risk of financial loss due to poor advice. Out of 307 customers advised to transfer out of their DB pension schemes, 261 completed the process. Notably, Mr. Cobill advised 245 of those clients, including 198 members of the BSPS, whose pension benefits totaled over £90 million.

Mr. Hofstetter, responsible for compliance oversight of IFM's pension transfer advice process, has been banned from holding senior management positions at regulated firms, reinforcing the severity of the regulatory actions taken.

To contribute to compensation for affected IFM customers, Mr. Cobill and Mr. Hofstetter have agreed to pay £120,000 and £40,000, respectively, to the Financial Services Compensation Scheme (FSCS).

Therese Chambers, Joint Executive Director of Enforcement & Market Oversight at the FCA, emphasized the significance of protecting pension assets, stating, "Pensions are the safety net people spend their lives building. For many customers, their DB pension was their most valuable asset, and it was their only retirement provision other than their state pension. As experienced advisers, Mr. Cobill and Mr. Hofstetter, and IFM should have known better than to unravel this."

The FCA's actions aim to hold financial institutions accountable for providing sound advice, particularly in circumstances where clients are navigating significant financial decisions such as pension transfers.

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