“Probing” IFAs is not enough; we need simpler more transparent transfers.


Allegations of “mis-selling” against IFAs are premature and unsubstantiated.

My eye was caught last night by a linked in post by Andrew Warwick-Thompson, formerly of the Pensions Regulator.

Here we go again. The personal pensions miss-selling scandal all over again. Per the FCA over 50% (so far) of the advice given to Port Talbot workers was not appropriate. When will we learn that for the majority of consumers a transfer out of a DB pension is not in their best interests?

A sentiment that all right-minded pension professionals could agree on. There are similarities between now and the introduction of transfer values in 1987. But the difference are bigger than the similarities. We have to deal with the present problem in a different way than we did in the mid-90s and we need to use prevention as the best cure.

Andrew’s comment linked to an FT article UK’s FCA to probe thousands of pension advisers after Port Talbot crisis” 

The article quotes the FCA’s (Megan Butler’s) letter to Frank Field (Dec 21st)

 In 2018, we will be collecting data from all firms who hold the pension transfer permission with the intention of assessing practices across the entire market to build a national picture

I replied

To be fair to the IFAs , the FCA surveyed 88 transfers and none of them had anything to do with BSPS. It’s a small sample to condemn advisers with.

It’s good that the FCA are going to continue their investigation into transfer advice, 88 cases is not a large enough sample when Origo reported that over half a million transfers occurred in 2017 alone.

Nor is it good enough to imply that the problem is all about IFAs. I take issue with the FCA’s headline; “probe” is the wrong word, “consult” would be fairer.

In this article, I suggest that the FCA need to look beyond IFAs and consider

  1. How they get (and how whistle-blowers give) intelligence
  2. How whistle-blowers can be better encouraged and supported
  3. The role of trustees and their administrators in providing intelligence
  4. The role of SIPP managers – especially their accountability for the destination of investments
  5. The application of the fit and proper rules to those managing SIPP investments.

It’s a long list – too long – there are far too many parts, too many regulators and a lack of co-ordination around a central purpose. The reason I am writing this blog is that I can find no other account of what has happened at Port Talbot that could enable the Pension Regulator , the FCA, trustees, IFAs , SIPP managers, fund administrators and fund managers to see the problem in one view. It may also be helpful to the Work and Pensions Select Committee as they prepare their report on what has happened at Port Talbot.

The difficulties good IFAs and the FCA have had putting matters right.

The activities of Active Wealth Management came to light because Al Rush and went to Port Talbot at the invitation of the moderators of the BSPS Facebook Groups. It was Stefan Zait and Rich Caddy who drew out attention to problems at Port Talbot, it was the steel workers themselves who put us on to Celtic and Active Wealth management and it was Al and I who brought our intelligence to the FCA.

When giving evidence at the Work and Pensions Select Committee, Megan was asked by Frank Field  ”

Chair: So you went into the plants at dinnertime and talked to the men there?

She replied that she was about to go to Port Talbot – which she did, the next day.

Frank Field asked if she’d been in touch with me and pressed on the mattermegan butler

Actually both Al Rush and I approached the FCA. Al is a Pension Transfer Specialist, I am not – I haven’t been an adviser since 2005 and actually took holiday to go to Port Talbot.

Megan has been charming , courteous and I have congratulated her every step of the way. I am totally behind the work she is about to do with the FCA and I hope that it brings about lasting change that stops the haemorrhaging of monies from good occupational schemes into SIPPs and then to who knows where.

Al and I only lit the blue touch paper and sprung the FCA into action. But had we not done this, Active Wealth Management, with whom the FCA had been dealing since August 2016, would undoubtedly have continued shipping money through SIPPs to Gallium , Vega and 5Alpha.

But Al did not stop there, he went on to set up Chive which has done great things to put wrongs right and provide the counselling to steelworkers that they needed. He has worked with TPAS and has built up a network of like-minded IFAs who have given freely of their time. This has been recognised in New Model Adviser. Looking through the 33 comments on this post, I see praise and support for Al and Chive’s IFAs. But I also see professional jealousy.


Chive did come to the rescue at Port Talbot and they guided the FCA to where the problem was. I actually agree with Megan Butler that she could not reasonably have been expected to have been in “the plants at dinnertime”. She relied on evidence which got passed from steelworkers, though the Facebook pages and IFAs. That is how it works.

The offensive post from Kuchu, quite misses the point. IFAs care about their reputation and the reputation of advice. So does the FCA. But the primary driver in all this is the fate of the money that has left BSPS. We now know that Darren Reynolds himself, helped £40m out of BSPS and into 5Alpha. Chive (and I) continue to lobby for the return of that money to the SIPPs through which it passed (without penalty).

For people like us to act as we do, means we have to take considerable risks. We risk upsetting everyone and getting considerable abuse. Al Rush is one of the bravest people I have ever worked with, he spent much of his life dodging bullets in the service of his country – he has faced worse than Kucho and his whispering friends.

We need to stick up for our whistle-blowers as we need to stand up for our troops.

DB Administration and its shortcomings

I work with other large occupational schemes, some much larger than BSPS. I see they have the same problems as BSPS in preventing the departure of money from their DB sections or identifying where the money goes.

One scheme I am particularly involved with shares the same administrators as BSPS so I can see exactly the problems that Derek Mulholland has. The only direct contact the scheme has in the process is in transferring money to the SIPP. It is the administrator who verifies the IFA has certified the transfer.

The management information that trustees need to identify where there are clusters of transfers around specific advisers (as happened with BSPS), is not available to them in a timely fashion. It takes too long to gather and – when it arrives – it is inconclusive. Trustees can only see half the story. Here is the list of SIPP providers and the amounts they put into Strand Capital (the failed predecessor to 5Alpha).

Gallium SW3

With a couple of exceptions all the introducers are well known SIPPs. A trustee asked to send money to James Hay or Curtis Banks or Intelligent Money could not have known that it might have been lost to Strand. BSPS were sending money to Momentum , Intelligent Money and Fidelity (at Darren Reynolds’ request). They could not have known it would go to Strand’s phoenix – 5 Alpha.

They could and should have seen an unhealthy concentration of transfer activity through Active Wealth Management, but my experience suggests that the MI systems would not have been able to pick up these patterns in short time. Certainly there are lessons for administrators in this.

The screen that divides trustees and the FCA

But there is also a lesson for SIPP providers. I have spoken to SIPP providers who were approached by Strand’s sales team and by Vega Algorithms and said “no”. As one SIPP provider told me “there was no way we were going to have our money going to Strand”.

There is also a lesson for the FCA, who knew of the connections between Strand (which is in special administration) and Vegas and 5Alpha – from the Witness Statement of Joe Egerton (dated 15.05.17) detailing the links between the three organisations.

The SIPP providers are effectively a screen dividing trustees and the FCA. Trustees can see the SIPP providers (and the advisers using them- eventually). The FCA can see the asset managers to whom money is directed – but not the origination of the money.


A more open transparent system is needed.

This article started by looking at the lack of understanding of a former pension regulator; it looked at the problems facing the FCA in getting intelligence on Port Talbot, the issues facing project Chive and the distrust many people have with the motives of whistle blowers.

The article goes on to look at the difficulties trustees have finding out what is going on, the problems administrators have providing timely MI, the inability trustees have to see the probity of the investments made by SIPPs (under instruction from advisers)

Finally it looks at the problems the FCA have tracing the origination of monies arriving at fund managers like Strand and 5Alpha because of the lack of transparency created by the SIPP screen and the opaque structures of certain investment structures.

My conclusion is that the FCA need to look at the problems with transfers holistically. They cannot simply look at advisors, they need to talk with SIPP managers and the fund administrators and managers behind them. They need to get the other side of the SIPP screen and talk to trustees and their administrators. We need better intelligence and that means enabling trustees and administrators to bring intelligence to the FCA’s attention in a timely way.

Above all , we need to make whistle blowing an activity to be encouraged. To my mind the comment of “Kucho” is akin to racism or homophobia , a kind of hate crime that should not be tolerated.

Project Bloom – which brings together the enforcement activities of the FCA, tPR, the police and Action Fraud, is a closed book to those who pass information to it. Again and again, those who report to Action Fraud, get no feedback, no thanks and no support. They watch the train crash and are barred from making public comment lest they be accused of “tipping off”.

The system seems set up to allow the regulators to operate a closed shop. While I support Megan Butler , it was right that Frank Field called her to account and it is right that I and others continue to demand action on 5Alpha and its infrastructure.

I hope that this blog, and others like it will bring about lasting change and not just dump the problem on IFAs – who I consider are being made unfair scapegoats for a much wider failing.





About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in Blogging, BSPS, Change, FCA, pensions and tagged , , , , , , , , , . Bookmark the permalink.

3 Responses to “Probing” IFAs is not enough; we need simpler more transparent transfers.

  1. Brian Gannon says:

    I hope that regulators will start to understand more that the real problem is the products that advisers are authorised to sell. There are undoubtedly some truly awful advisers who are simply looking to make money as easily as they can by circumventing the rules. These advisers are always going to exist regardless of the rules and regulations because they are essentially unethical about how they make their money. If they were not allowed to sell or market unregulated investments and if DB transfers were ringfenced then consumers could only invest in shite like Alpha5 if they are doing it themselves. If the people manufacturing the Alpha5 fund were not allowed to pay commission via SIPPs then advisers would not recommend them because they would not be rewarded for doing so. SIPP providers should be informed of which collective funds are regulated and only those funds which have been regulated/authorised by FCA should be allowed to be advised by advisers via SIPPs. If consumers wish to buy such shite via their SIPP wrapper they should do so directly and should have no illusions that such investments have FSCS protection. Just like buying equities directly or commercial properties consumers should have no protection at all for taking that kind of risk. If regulated advisers cannot advise on such funds then if they go ahead and do so they are then criminals rather than breaking rules. SIPP providers should also be prosecuted for allowing an advised transaction to take place via a SIPP. This is then where the law comes in. The regulator should regulate and the courts should prosecute. Although DB transfers out are generally not advisable and although “special circumstances” should exist for a transfer to be advised, there are actually thousands of cases where such circumstances do exist. As a result it is not wrong that thousands of DB transfers have occurred. As long as people know the risks they are taking it is not wrong to give up guarantees if there are genuine benefits in doing so, and where by doing so the pension member can secure genuine advantages from pension freedoms and personal control. So to create a whole new set of regulations restricting the advice is not a good solution. It is the products that need regulating and those advisers who go against the rules need prosecuting by the criminal courts.

    Liked by 1 person

  2. Robert says:

    Thankfully there are people like Henry and Al Rush who act as they do whilst taking on considerable risks, otherwise this whole issue may not have been highlighted and progressed as it has!

    Liked by 1 person

  3. Phil Castle says:

    Very good article one again Henry. I second Brian Gannon’s comments on solutions.

    Liked by 1 person

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