When is an adviser not an adviser? When he is an “introducer”.
It sounds like a bad joke but it is no laughing matter for the consumers who find themselves targeted by such firms.
In a recent case highlighted to me, a low-paid worker received a call offering her a pension review. When she agreed, this was followed by a home visit involving a three-hour presentation about investing in hotels in Cape Verde. At the end, she signed paperwork to set up her own company with a self-administered pension plan, into which she planned to transfer 75 per cent of her existing pension, valued at about £60,000. Aside from her home and a modest Isa portfolio, this was her entire wealth.
What is most shocking about this case is that the person who visited her and the companies involved do not appear to have broken any rules. This is because they are “introducers’’, not advisers, and as such are outside the FCA’s remit.
Such firms say they make it clear that they are not giving regulated financial advice. This means they do not have to check whether the investments they are “introducing” are suitable for that particular customer. They are simply giving information, while possibly facilitating the quite complex process needed for ordinary consumers to invest in such schemes. But just to stress, this is all totally legal and above board.
I find this an unsatisfactory state of affairs. These introducers might couch their sales pitch carefully but the customer I spoke to came away with the impression that this was a recommendation and one she would be foolish to miss.
The introducer completed an extensive financial audit, giving the customer up-to-date valuations of her savings, pensions, mortgage and income. It is perhaps not surprising that she thought the investment then discussed was relevant to her circumstances.
If I were a financial adviser, I would be hopping mad about such practices. In the past year, the FCA has taken steps to stop advisers even mentioning the words “unregulated assets” in case this is inadvertently taken as a recommendation to buy. It has also made a concerted effort to clamp down on dubious pension-unlocking firms.
I fully support these moves. But I wonder whether some of these firms have reinvented themselves as “introducers”.
I have no idea how widespread this practice is and would like to hear from anyone whose clients have been similarly approached.
Warning people to deal only with authorised advisers is not sufficient. The FCA must tighten the rules to make it far harder for these “introductory” firms to flourish.
Emma Simon is a freelance journalist