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FSA warns IFAs on Ucis sold through Sipps

The FSA has stepped up its attack on unregulated collective investment scheme sales and raised concerns about Ucis sold within a Sipp.

Speaking at an FSA investment managers and private equity event in Canary Wharf last week, head of savings and investments Linda Woodall said in some cases IFAs have told customers to remortgage their houses and put the money in Ucis.

She warned that others have placed clients in Ucis within high-charging Sipps when they are not the most appropriate vehicle.

Woodall said this lack of concern about the products being recommended “poses a reputational risk to both the IFA and asset management sectors”.

She said 131 Ucis files were reviewed by the regulator in the Summer and in 58 of the files advisers recommended their customers invest or transfer existing pensions into a Ucis within a Sipp.

She said: “To make it worse, the firms involved did not consider, or explain, the implication of costs and charges of the recommended Ucis, and, in a number of cases, it was not evident that a Sipp was the most appropriate vehicle for the customer’s pensions need.”

Woodall said typical Sipp charges can include an 8 per cent initial charge, a 2 per cent annual management charge, a £500 up-front administration charge, a 5.9 per cent transfer penalty and fees of 5.6 per cent.

She said: “These are significant costs, and should be explained to the customer.”

In August the FSA announced it had told 11 firms to stop promoting the products and warned that the providers were using aggressive sales techniques, such as offering trips abroad and high commission.

Meanwhile, Woodall also hinted that the FSA has turned its attention to the marketing of so-called ‘cautious managed’ funds, which aim to reduce client losses in volatile markets by capping equity exposure.

She said: “[Customers] also rely on the clarity and quality of the documentation they receive from both their adviser and the asset manager to make informed decisions. So, for example, to describe a fund as being in the cautious managed sector, without a clarification on the actual risks inherent in the fund, could lead a client to think this is low risk.”


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There are 17 comments at the moment, we would love to hear your opinion too.

  1. “Woodall said typical Sipp charges can include an 8 per cent initial charge, a 2 per cent annual management charge, a £500 up-front administration charge, a 5.9 per cent transfer penalty and fees of 5.6 per cent.”

    My goodness those are high charges but not surely the charges of a “typical” SIPP?

  2. FSA to Set Up Advisory Arm

    They might as well as they seem to want to criticise and comment on every product out there.

    Are they qualified to give these opinions?

  3. Ms Woodall’s comments are consistent with an increasingly “typical” approach by the FSA to grossly exaggerate examples of poor practice.

    The charges quoted are in no way representative or typical, and I challenge Ms Woodall to produce an example of a single product provider who applies the combination of charges she has quoted.

    Gross exaggeration is the more typical response of those with an inherently weak position to defend.

    Perhaps Ms Woodall would like to explain the consumer detriment caused by the FSA classifying the Arch cru funds as NURS (i.e capable of being sold to anyone) instead of QIS (i.e severely restricted qualified investor schemes)?

  4. We do sometimes get wound up about the FSA but if this is typical of what is happening out there then no wonder they consistently beat us up.

    I can’t believe that advisors are still out there putting clients into those charging scenarios!

  5. Look carefully at what she actually says: “a typical sipp CAN include 8% etc etc” In other words, she has looked at all the ways charges CAN be levied, and inferred that they are! Not sure where she got 5.6% fee from though.


  6. If the comments regarding exaggeration are correct the only conclusion I can reach is that the FSA is being dishonest.
    What sort of example is that?

  7. It would be helpful if the comments around SIPP charging could be clarified. I’m not aware of any SIPP that charges to that extent, and feel sure that reference was being made to investment charges, not SIPP charges.

    I’m not sure why it was necessary to bring discussion of a product wrapper like a SIPP into a discussion that is essentially just about UCIS.

  8. To Greg @ 4.52

    The reason for concern of using the SIPP is the double charging bearing in mind UCIS often have quite high charges of their own

  9. 2011 must be better 20th December 2010 at 6:53 pm

    Advisers should be more careful about their investment choices. Why are they choosing SIPPs rather than ordinary Personal Pensions? If it is for more esoteric investments, what due diligence are they undertaking about their choices? How are they justifying their choices of UCIS over the many regulated funds available?
    Sometimes advisers just try to be too clever.
    However, the FSA do seem to be quite jumpy about things at the moment. Anyone would think that they needed to justify their existence or they will be closed down! It may be a case of better the devil you know, although it is difficult to imagine a more useless, pointless, wasteful organisation, except when I remember the fools who do our compliance!

  10. Jeepers – her lack of knowledge is unbelievable!

    If she is the head of savings and investments and has this little understanding of products then things are ven worse than I could have imagined.

    Somebody MUST pull her up on this type of statement – Money Marketing – surely you have an article on SIPP charging that would totally refute her claims – please send it to her and some MP’s and ask for a response. In fact, just send it to the MP’s and they may publicly refute her claims and embarass her more than she has already done herself.

  11. Not very sure how the FSA lady has got her charges but buried deeper she has something.

    There are ‘advisors’ out there who are advocating that people dump their ‘crap’ pension funds into foreign holiday property investments via a SIPP.

    The sun, sea, mojitos make a good story and within the detail are placed many charges.

    I was personally offered 10% commission of the total amount that would go into client SIPP funds which would include any borrowing. All I had to do was give my client over to the property reps and their own pet IFA would do the rest.

    Need I then also mention the £50k USP report for another client that was recommended to go to a SIPP with no charges shown and invest in property funds ex UK which were bespoke and not exactly liquid for 3-5 years. The only noted charge was the adviser cost of 5% initial.

    Glad the FSA is starting to treat all these issues the same as an Advisor normally does rather than allowing this to slip under the Radar.

  12. I am astounded that SIPP charges can be that high. What is worse is that there seem to be advisers that are recommending such products with ( I assume) such high charges and incentives. The FSA will use such examples to drive forward RDR but they should be taking all instances of these seriously and censuring or fining such advisers immediately. It’s these cowboys that need to be expelled from the industry ( advisers and product providers alike) and until they are, they will continue to give us all a bad name and ammunition for the FSA to kill our industry. Naming and shaming them would also help, especially on the FSA consumer website if they are found guilty of such practices.

  13. This is digusting attempt to tarnish all S.I.P. Providers with the same chargeing structures and all Advisers with the incompetence to accept a ridiculously high set of fees for there clients.
    this women is being very economical with the truth where does she get her information from ??
    Its actually very frightening to here a person in public office talking such tosh !!

  14. The behaviour of the FSA has long since been Orwellian: this is just another attempt to take the “I” out of IFA. Independent thought and rationale is essential to the welfare of the client but is anathema to regulators like the FSA. This also smells disturbingly like the beginnings of a capital control mechanism – we all know the UK is bankrupt – has the FSA been encouraged by someone in government to try to prevent outflows of capital into the mutual funds of other jurisdictions? I.e. jurisdictions where the capital (and its taxation) is beyond the control of the UK government?

    Clients buy Ucis thru SIPPs, Offshore bonds, trusts and even directly because they want to diversify their portfolios into funds that will better protect their wealth in the event of a sterling crisis/gilt crisis (see today’s headlines re UK government debt) or indeed just a second leg of the financial crisis which many expect to bite next year. Does the FSA know how many UK OIECS funds use RBS as a depository, for example? What kind of monkey would believe RBS is solvent?

    What is wrong with a client wanting to invest some money in a Uci that has multiple currency accounts with multiple (non UK) banks? How many UK OEICS have dual custodians? Many Ucis do. How many UK funds have 5 plus bank accounts with different banks and in different currencies? I am not taking about currency plays with derivatives here, I am taking about actual deposit accounts with solvent banks. Ucis can also hold physical gold held in the name of the Uci – not an ETF, not a derivative, not a note – but actual physical pickup and touch gold bullion that is locked in secure vaults in Zurich/Geneva with the name of Uci on it. How many UK funds do that?

    There is an old adage about eggs in one basket – you can take basket to mean fund but you can also take it as jurisdiction – we live in a globalized economy – we should design globalized investment portfolios and ignore the meddling of the FSA. There is no law against recommending Ucis.

  15. Robert pryjmachuk 21st December 2010 at 2:27 pm

    Cautious funds, that will be cash in a Iceland bank then will it

  16. This is another example of scarmongering by exaggeration. My experience of some key FSA personnel is that they continually try to place foundations for personal career development rather than taking an objective view.
    My understanding of SIPPs is that they perform a useful service in the financial marketplace and the charges quoted by Ms Woodall are unusual, to say the least. She should offer evidence to her statement or be damned.
    As for UCIS investments I have no comment as this is an area outside my personal exptertise. However, I would have thought that a firm using the techniques and recommendations stated by Ms Woodall ought to have FSA associates crawling all over them. If not, why not?
    Apologies for remaining annonymous but I am ex FSA and have a partner still working there. And, for the record, not all FSA personnel have the same view of firms as the stereotype would suggest. A lot of us are from a retail background and bring pragmatism to supervision. When we leave we return to retail firms.

  17. Anonymous | 22 Dec 2010 11:08 am

    “… I am ex FSA and have A [my emphasis] partner still working there.”

    How many partners do you have?

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