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Down on the farm

I read that the Aifa and ABI are telling their member firms to dissuade claimants from being represented by so-called claim farmers in respect of endowments but balk at defining anyone not regulated by the FSA as such. Instead, they define them as being “not members of a professional regulatory body”, which is obviously intended to defer to designated professional bodies such as solicitors (Law Society) and accountants (ICAEW).

The latter’s ranks, incidentally, are currently involved in an almighty internecine squabble about admitting other accountancy bodies whose members are not even in practice and by the traditional definition not professionals at all. At least that is what a lot of ICAEW members themselves say.

The fact that DPBs exist at all speaks more eloquently than I ever could of the failure of trade bodies such as Aifa, the ABI, the LIA and so on (there’s dozens of ’em) to influence the FSA and financial services legislation, which appears to be their main raison d’etre.

Under DPB rules, they are allowed to “comment on or endorse advice given by a permitted third party (PTP) to its clients”. As Stanley Baldwin once famously said: “They enjoy the privilege of the harlot down the ages – power without responsibility.”

The sort of adviser who sold endowments that have shortfalls, for example, those sold after the introduction of Miras from the mid-Eighties on, when the bandwagon really got rolling, will have sold them in big numbers and in utility fashion usually by being in cahoots with estate agents. These are the firms that will now be getting volume complaints and many are passing the risk to the FSCS by phoenixing.

Although the FSA purports to have prioritised stopping this practice, it does not appear to have in place any checks. Their main application form A does not even ask about pending complaints from the public, ombudsman or anyone else.

The generalist IFA that sold the odd endowment is likely to be more troubled by accountants and solicitors giving conflicting counsel to clients on IHT planning and tax efficiency than from claim farmers. And since the vast majority of endowments were missold by banks and 16-year-old cashiers in former building societies, IFAs have a ready-made source of marginal profit by legitimately providing such an investigation service themselves.

Unless they are badly advised, they will set up a subsidiary, non-regulated limited company to do it and so attract the disdain of the Aifa and the ABI.

Peter Bright Abacus Financial, Stourport-on-Severn

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