In a letter to members, director general Chris Cummings says savings products such as accumulation, investment and income plans as well as structured products are of particular concern because they are designed to be sold without advice.
He says: “There is a potential for conflict of interest when a broker is wearing one hat as an independent mortgage broker and another hat as a tied investment adviser. There is increased room for confusion, and advice could inadvertently be given in the wrong circumstances. The premise behind these products is that they are sold on a direct offer basis, and not sold with advice.”
Cummings warns that the Financial Ombudsman Service may look unfavourably on brokers selling such products to boost their income in difficult times.
He says: “It should also be noted that the FOS is likely to take an alternative view of cases where a client sought such a product, than where a client is sold a product when originally seeking advice on an alternative area such as mortgages. In this case it could be argued that a greater duty of care is needed and therefore there is a potential liability to selling these products.”
He says brokers need to make sure clients are aware that the funds are not guaranteed any more than a bank deposit and that access to the funds during the five year investment period is very limited.
Cummings says: “AMI is fully supportive of firms considering alternative business areas in difficult times but want members to carefully reflect on the implications of such action.”