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FSA launches crackdown on Sipp/Ucis advice

FSA e14 Building View 480

The FSA has launched an investigation into firms offering Sipp advice as part of scheme for clients to invest in high-risk underlying, unregulated investments which are not advised on.

In an alert the regulator expresses concern over advisers moving clients’ retirement savings to Sipps which hold wholly or mostly high-risk, unregulated investments such as diamonds, overseas property developments, store pods, forestry and film schemes.

The FSA says it has secured a variation of some adviser firms’ regulatory permissions to stop them operating in this way.

It says: “The cases we have seen tend to operate under a similar advice model. An introducer will pass customer details to an unregulated firm, which markets an unregulated investment. When the customer expresses an interest in the unregulated investment, the customer is introduced to a regulated financial adviser to provide advice on a Sipp capable of holding the unregulated investment.

“The financial adviser does not give advice on the unregulated investment, and says it is only providing advice on a Sipp capable of holding the unregulated investment. Sometimes the financial adviser also assists the customer to access monies held in other investments so that the customer is able to invest in the unregulated investment.”

The FSA has called on Sipp providers to report such firms to its whistleblowing team on 020 7066 9200.


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There are 7 comments at the moment, we would love to hear your opinion too.

  1. Surely, there is a clue is the initials SIPP “Self Invested Personal Pension”
    The client researches their funds and invest, simples

  2. To

    Anonymous | 23 Jan 2013 9:18 am

    If you recommend and set up a SIPP on behalf of the client you have come to the conclusion that it is the best product for that client because it meets their investment criteria and therefore you have made an assumption of their attitude to risk.

    You cannot dissolve yourself of the investment choices just because the product says its Self Invested Personal Pension, recommendation is yours. If the client was able to make a decision on their own than they would have completed the transaction themselves without seeking advice from an adviser e.g. execution only. It that simple my advice would be to start reviewing your files if you hold that opinion above.

  3. I brought this practice to the attention of the FSA last year when I saw a new client who had been advised by another IFA to move a fairly modest PPP to a SIPP. The advice was completely unsuitable and the report made no mention of what investment advice was being given although during the process the client was ‘introduced’ to an individual representing a non regulated investment company which coincidentally happened to be part of the same group of companies as the IFA giving the pension advice! The advice from the non regulated individual was surprise, surprise to invest in UCIS.

    I am greatly encouraged by the fact that having brought this to the attention of the FSA and their whistleblowing team, the IFA practice in question has had their part 4 permissions varied. Proof that the regulator will act if individual advisers do the right thing and bring poor practice to their attention.

    Well done FSA for a change!

  4. Most people who move the pensions to a SIPP want to do so in order to invest in shares. By its very nature, investing in singkle shares is high risk. Most will move their own PPP into SIPP. However, most SIPP providers will not allow an individual to transfer their Occupational pension scheme without sign off from an IFA. If the client tells you he wanst to invest in shares and at a later date invests into a UCIS who gets the blame?

  5. To Anonymous | 23 Jan 2013 11:03 am

    You are simple

  6. I echo Peter Herd’s comments; I’ve come across this in practice both where a client has been approached directly by a UCIS provider and also where I myself was approached by a ‘marketing company’ who were offering 15% ‘cash back’ from my pension fund plus a yield of 8%.

    I explained I was an IFA and I was interested to understand more and essentially what the FSA have identified here is exactly what they were suggesting.

    As Peter suggests, you can’t transfer a client to a SIPP without justification and if you don’t know what that justification is, you therefore can’t recommend the switch.

    If the justification is to invest in a UCIS, they, as far as I’m concerned (though I’m sure others will disagree) you have a duty of care to the client even if you aren’t recommending the UCIS yourself.

    It would appear to me that UCIS have been used as a means to ‘churn’ pensions on the back of the promise of fantastically high (and no doubt low risk) investment returns and in doing so generate lots of commission with little care for the client.

  7. Thank Paul Stocks agree

    Agree with every point you have made and until our industry kicks out advisers who are willing to act in such a way we will always be tarred with the same brush.

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