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FSA warned of post-RDR ‘ghost’ advisers

FSA Front Door 480

Advisers are warning the FSA there is evidence that people who have not met RDR requirements are continuing to operate as “ghost” advisers.

One adviser, who wants to remain anonymous, says he has spoken to two business owners who are continuing to operate despite not meeting RDR qualification requirements.

He says: “The first person has failed an exam a number of times and has told the regulator he is not qualified but he continues to give advice on non-regulated products in breach of FSA rules.

“In the second case, the business owners are not qualified and have employed an office junior to sign off the advice in order to get around RDR rules. The reality is it is the unqualified individual who is giving the advice and I suspect this sort of arrangement is rife across the industry.”

The FSA says it is launching a thematic review in the coming weeks to weed out “distortions” in the marketplace. The review will include an investigation into advisers who continue to trade despite failing to meet minimum RDR standards.

A spokeswoman says: “One of the key aims of the RDR is to improve trust in the industry. If advisers have evidence that people are behaving in a way which could undermine that trust then that affects everyone in the industry.

“We strongly encourage advisers to come forward, even if it is anonymously, to tell us about things like this.”

Syndaxi Chartered Financial Planners managing director Robert Reid says: “This is a major concern for the advice industry. The FSA needs to make an example of anyone who is purposefully flouting the rules because it damages the entire industry.

“Anyone who continues to offer advice when they know full well they should not needs to go to jail.”


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There are 20 comments at the moment, we would love to hear your opinion too.

  1. Ghost Advisers?

    They’re nothing – it’s Stay Puft Regulators you’ve gotta be wary of.

  2. “The first person has failed an exam three times in a row and has told the regulator he is not qualified but he continues to give advice on non-regulated products in breach of FSA rules.”
    In breach of what FSA rules?
    It has been know for a very long time that the qualification requirements would be different for individuals giving advice on anything NOT in the list of retail investment products … mortgage and non-investment protection being the obvious ones, but plenty of other things too … recent reporting on gold bullion and For-Ex highlights exactly the same problem …

  3. Derek Bradley ceo Panacea Adviser 22nd February 2013 at 9:27 am

    Having been a defender of the smaller adviser firms in particular for a long time and wishing to see the integrity of the ‘brand’ maintained I am appalled that anyone would even think of placing themselves and their clients in the line of fire. The step from non regulated products to regulated is pretty small.

    During a TSC grilling of Sants in March 2011 Andrew Tyrie raised the issue of FSA accountability and this led to an interesting line of questioning that I am sure many remember, it went as follows:

    Q41 Chair: “Reckless behavior was defined for me when I asked exactly this question when FSMA was going through Parliament. Recklessness was described as doing something really stupid knowing it’s really stupid. Do you think that you should retain immunity from redress in the courts for doing something really stupid knowing it’s really stupid”?

    Hector Sants: “Of course, presumably the question is: who would pay? Would you then be suggesting, given our only revenue raising capacity is the firms, that in the event that you judge that the officials had breached the requirements you outline, we would then retrieve the money from the firms, or if you felt we should be paying, you probably would find you would have an issue as to who would want to work in the business”?

    Well, in this case the individuals are “doing something really stupid knowing it’s really stupid” and it is not a case of wanting to work in the business, it is a case of they should not be working in the business if they cross that line.

  4. Let’s see how the FSA apply the same standards to the banks who promote mortgage “advice” when none actually given by their staff

  5. @ Anonymous 09:33… you’re really testing the definition of tenuous… you manage to manufacture another dig at banks despite this issue being 100% attributable to non-banks. Perhaps on this occasion at least you should recognise that your own segment of the intermediary market has its own shortcomings.

  6. I must be missing something. Anyone can advise on anything and be paid for it. All they cant do is misrepresent their qualifications and belonging to a specific organisation. People need to remember that the fsa do not have the power to bend the consumer over the barrel and insert sharp objects just for giggles like they do with the advisor community.

    You only have to read the drivel MP’s come out with to validate that the FSA have no control over ignorant people completely misleading the public when it comes to the financial market place.

  7. I am not sure you need to be qualified to give advice on non-regulated business. Not that such matters in my case I am qualified. Obtaining the qualifications took a lot of time and effort so I am not at all sympathetic to those carrying on regardless. Anything pointing in that direction will be reported to the regulators who I expect to take swift action against.

  8. for clarification... 22nd February 2013 at 10:20 am

    Seems to be a bit of confusion in the comments above, driven by the non-regulated comment in the article above.

    The regulated activities order (RAO) sets out what is a regulated activity (e.g advising or managing) and what is a specified investment (e.g Securities or CIS)

    Therefore ifyou perform an regulated activity in a specfied investment you need to be authorised as a firm and approved as a person (if your giving the advice, if not the person giving the advice for you needs to be approved )

    So if i am not already authorised as a firm and decide to start selling physical gold to people, i dont need to seek authorisation from the FSA (its not a specified investment under teh RAO)

    If i am already an authorised firm with advisory permissions, and i start advising on physical gold holdings, as long as they are not in a SIPP (which is a specified investment under the RAO) i dont technically need to follow Suitability rules etc…. and i dont need to be a CF30 for that area of the advice. However:

    I would suggest in this second scenario, as a regulated and authorised firm the FSA could hold you to account under the broader principles (probably TCF) if they felt your advice on Gold (all be it not within the remit of the RAO) was not in the best interest of clients.

  9. Surely the issue is that while the investment schemes may be unregulated the advice process is not.

    The stance we have for all clients is that it’s OK to mention generic solutions i.e. bonds OEICS etc but as soon as a product or specific company is mentioned i.e. you need a Standard Life bond – that’s advice.

    Good to see that RDR is making it easy for the consumer though.

  10. Whilst products may be be unregulated advice is regulated – a point often ignored by providers of unregulated products.

    I fail to see how a thematic review would pick this up though – if someone is bending the rules they are hardly going to admit to it.

    The only way to catch people bending the rules is using members of the public to approach those suspected of pushing the boundaries too far.

  11. “Anyone who continues to offer advice when they know full well they should not needs to go to jail.”

    If that were the case, a lot of men down the pub, well meaning parents and solicitors are in for a long stretch!

  12. RegulatorSaurusRex 22nd February 2013 at 2:54 pm

    If you are unqualified the rules say you cannot advise on investment products because you will not be authorised to do so.

    What is is article about?

  13. Was there much demand from Ghosts for financial planning pre-RDR?

    Sorry I couldn’t resist 🙂

  14. The way the FSA are behaving it is only a matter of time before all advisers will be ghosts.
    Wouldn’t it be great if we could all then haunt the FSA

  15. I think Nick B sums it it up really.

  16. Just tidying up emails from a busy week & got drawn to this headline! It’s really simple – get qualified or do somethingh else!!
    Nobody is perfect & we all have views on the rights & wrongs of ever changing rules but to simply ignore minumum qualification requirements is frankly just wrong.
    Best wishes to those who want to do the job properly & within the rules. Enjoy the weekend!

  17. Not only should the FSA crackdown on individuals who have previously been authorised and haven’t passed the exams they should also be cracking down on other forms of the illegal advice.

    How many solicitors, accountants and even bookkeepers are giving financial advice without having the correct level of authorisation.

    A solicitor or accountant is allowed to give incidental advice through their regulatory bodies but this is meant to be simple incidental advice and not complicated wealth management. I wonder how many accountants or solicitors there are giving complicated pension advice without proper authorisation.

    Another good example would be a solicitor giving advice to a divorced couple on a pension sharing order without consulting an IFA. This is not incidental advice this is complicated transitional advice that requires a properly qualified individual. If solicitors and accountants want to trade under their professional bodies and they still required to have FSA authorisation where they conduct the business.

    I hate to bleat on about this subject but us IFA’s are ending up paying for the regulatory structure with other individuals getting away with paying no fees. Either have proper registered introduce agreements with an IFA or get registered as I for one will be reporting every single one of them in my local area.

  18. You can sell a house with no money laundering checks, no qualifications ….

    Selling a single UT however…

    This is terrible and shouldn’t happen. However I’m more worried about the ‘decision tree’ approach whereby an ex adviser sits in a room with a client and fills out a ‘questionnaire’ (not a factfind) and ‘helps them come to a decision about their choice of product’. This is going to be more dangerous than a few cowboys who will be ousted eventually anyways.

    Look at the macro as well as the micro.

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