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Advisers risk Ucis rule breaches through ‘inadequate’ factfinds

A law firm has warned that advisers are carrying out inadequate factfinding on unregulated collective investment schemes as inappropriate switching into the schemes
remains “rife”.

Speaking at a DWF Fishburns seminar in London last week, senior solicitor Charlotte Adol (pictured) said the law firm is seeing advisers gathering insufficient information about clients’ existing arrangements.

In June 2013, the FCA published final rules which banned Ucis being marketed to investors unless they are sophisticated investors or high-net-worth individuals.

Adol said: “It seems some advisers have sought to persuade their clients that they are sophisticated investors to try and bypass the new rules.

“There are also issues around inadequate factfinding. Limitations in the use of risk-profiling tools, unclear customer risk categories and insufficient information gathered about a client’s existing arrangements all continue to be problem areas where we see advisers falling foul of the rules.”

She added that advisers must also ensure client assessments are documented in sufficient detail.

Adol said: “Unsuitable or inappropriate switching remains rife. Obvious examples include pension transfers into Ucis and a failure to consider and explain to the customer the impact of additional charges.”

The Financial Ombudsman Service has seen a 49 per cent rise in Sipp complaints year-on-year, from 697 to 1,039. The majority of cases relate to advice to invest in Ucis. 

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 29th May 2014 at 10:14 am

    In the wake of all the fall-out in this area, I’m very surprised that any intermediaries are still going anywhere near these types of investment. As if all the troubles caused by the failures of ArchCru and Life Settlement plans aren’t bad enough, the risks of UCI Schemes surely outweigh by a considerable margin any potential benefits to either party. I’ve never touched them myself.

  2. In June 2013, the FCA published final rules which banned Ucis being marketed to investors unless they are sophisticated investors or high-net-worth individuals.

    The problem is not with the regulated adviser who understands the situation, it is with the unregulated bandits that are robing the public of their pension pots.
    The sad bit is that the FCA is doing very little about this other than pointing the finger at the regulated advisers.
    sad times

  3. I suspect that the vast majority of the ‘public’ have no idea as to what a UCIS is and therein lies the problem.

    Whilst I do not know the solution, the issue is that consumers could well be investing in funds which are neither suited nor transparent – issues compunded by the fact they may well be being ‘sold’ the investments by an unautorised – perhaps unqualified – individual.

    A broader concern is that those firms who genuinely look out for their clients are essentially working in the same ‘profession’ as those who are selling these and we are therefore potentially tarred with the same brush whilst also picking up the FSCS costs for the mistakes of others.

  4. Well maybe its down to the providers who are releasing the funds to check the credentials of where the advice has come from and not transfer unless from a regulated individual, I think this is going on as it took 6 months for a large insurer to transfer funds to a SSAS which nearly ruined a legitimate business property purchase, but 3 other providers just transferred the funds at the request of the SSAS Trustee with no questions asked.
    If there is then a complaint it should be on the provider, if not from an authorised individual for not doing due their diligence.

  5. Are properly regulated firms really still having anything to do with UCIS? I must admit having been until relatively recently on the BDM side of things for a life company and talking to a number of advisers who have done UCIS in the past that this surprises me quite a lot. Even those who were once very keen on them and sailed quite close to the wind stopped after the new guidelines came out (especially once the commission stopped on them…).

    If it is unregulated firms doing this and are advising clients to invest into UCIS, then its a criminal matter surely rather than a failure of regulated advice?

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