It is a sad fact that there are still crooks and incompetents out there in our industry creating financial mayhem with their clients’ money.
Just last month we had headlines in our local press about an IFA firm near Norwich. The two principals of the firm were arrested and were being questioned by the police over alleged fraud.
Thousands of pounds were apparently wiped off the values of their clients’ investments and pension funds through high-risk schemes entered into without their knowledge or consent. Reports suggest many of the losses were linked to in-house Contract for Difference investment schemes that went awry.
Tragic as it is for those who have lost their hard-earned savings, I cannot help feeling that the real story is about how – in this post-RDR age of all-encompassing regulation and microscopic supervision – a firm can get away with misconduct on this level? Surely there must have been clues somewhere along the line, such as in its Gabriel reporting, to trigger a light bulb moment down there at the FCA?
The RDR was supposed to rid our industry of the bad guys by imposing new qualification levels and by banishing the hidden costs to clients in commissions from provider to adviser. Transparency and fairness have been our watchwords for several years and I have become proud of our cleaner, leaner industry.
However, I guess any sector will have those who seek to undermine the rules and take advantage of the trust placed in them by their clients. What is important is that there are measures in place to stop them in their tracks before the damage is done – and that is exactly why we have the FCA.
Of course, clients have the reassurance of knowing they are protected if their adviser does not obey the rules. The Financial Services Compensation Scheme and the Financial Ombudsman Service give clients access to compensation and redress but this is at the expense of those of us out there rigorously sticking to the rules. The heartache and stress caused by rogue advisers will take its toll. It would be so much better if any misconduct could be nipped in the bud before real damage is done.
I cannot believe there were no clues in the reports submitted to the FCA by the firm in question. Surely it must have recorded the high-risk investments it had recommended to clients and its suitability reporting must have been flawed if it was recommending those products to clients without their understanding of what was involved.
Something is clearly wrong if a firm can still defraud its clients in this way without detection. If the current systems are unable to spot this type of activity, then those systems need changing. We have to make sure that people are protected from the mean, the greedy and the downright criminal members of our industry. The FCA is the appointed sheriff: it needs to find a way to get on its horse, catch the outlaws and put them behind bars.
Carl Lamb is managing director of Almary Green