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IFAs in quandary on advice options

IFAs are refusing to advise clients who were invested in the Eurolife secured bond for fear of the repercussions.

Intermediaries believe they are damned if they recommend clients to vote for restructuring and damned if they don’t and have pointed clients to the FSA.

Under the proposals from Eurolife, investors could get up to 60 per cent of the 17m which owed to 2,300 clients but if the firm does not find a buyer or fails to get investor approval for the proposal, then the company will go into liquidation.

Since Eurolife Assurance Group is unregulated, this would mean that any money for creditors would be redistributed by an impartial administrator but it gives no guarantee of investors getting the same amount of capital back.

If investors fail to get their capital back, they could claim money from the regulated firm that sold them the product and if the firm could not pay it could be declared in default of the Financial Services Compensation Scheme.

All these options are listed by the FSA on a question and answer page on its website. The regulator says it is not giving advice but only setting out options for investors. It advises going to an IFA for an opinion on which option to take.

But IFAs think that whichever option they advise, clients would have no guarantee and they could eventually end up having a claim made against them instead.

An IFA said: “If the FSA are so clever then they can figure out what to do, I can’t. Whatever I do could come back to bite me either as a claim against me or a bad piece of advice.”

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