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Nick Bamford: ‘Boring’ investments will top the unregulated tide

I still believe I can play football, even if it is mostly in my head rather than on the pitch.

That said, I recently played against my grandson’s under-8s team in the parents/guardians versus children end of season match. I rose majestically in the first minute to score the opening goal with a stunning header.

Ex-England captain Alan Shearer would have been proud to score that goal. But he will have been less proud of his selection of financial adviser, if the news a couple of weeks ago is anything to go by.

A lot of well-known sports and media personalities end up in conflict with their advisers.

The problem in Shearer’s case seems to be that his had recommended unregulated and non-mainstream products. The adviser had invested his Sipp monies in Ucis products and, I gather, had lost rather a lot.

It is something that happens all too often. Indeed, I think it is better to recommend “boring” investments for clients. One of the key points of our investment philosophy is that clients should understand each and every part of their portfolio.

Who pays for bad advice? Unraveling an IFA firm collapse

Back to basics

Understanding is generally easier where the investment funds themselves are simple. For example, single asset class funds are usually transparent and when they go up or down in value it is easy to identify why.

On the other hand, less transparent structured products are often more difficult to understand. This is particularly true where the outcome of the investment is determined by the performance of a number of indices.

That is not to say such products are not perfectly valid investment instruments but they do require a greater degree of explanation and a greater capacity on the part of the client to understand how they work.

Ucis remains a real problem for advisers. Each of us seems to be financially responsible for them even if we stay well clear for our own clients. Again, there may well be some perfectly valid Ucis products but they are now very tarnished indeed.

Each time I hear the Financial Ombudsman Service has received an increased number of Sipp complaints, I wonder if they are really Ucis complaints. In Shearer’s case, the problem seems not to be the product – the Sipp – but the underlying choice of investments – the Ucis.

Or perhaps the real problem is an adviser simply trying to be too clever?

Sipp and SSAS complaints to FOS increase by a third

Choose wisely

It is worth asking why Ucis is being recommended at all. It surely cannot be that there are no suitable authorised and regulated alternatives. Is it too cynical to believe this might have something to do with commission?

How did Shearer find his adviser? What due diligence was carried out, what questions were asked and what checks were made?

We all know what a challenge it is for a consumer to identify the right adviser for them but there is no excuse for not shopping around, just as we would do for any other goods and services we are not used to buying.

Shearer would have made a much better job of heading that goal against my grandson’s team but I reckon I would have done a better job of helping him select his adviser.

Nick Bamford is executive director at Informed Choice



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There are 8 comments at the moment, we would love to hear your opinion too.

  1. “Or perhaps the real problem is an adviser simply trying to be too clever?”

    Spot on. You can also add (or is it a subset?) “The adviser thinks they have found something that breaks the normal link between risk and reward”.

    • Well in a way they have. People don’t recommend this crap instead of a balanced unit trust portfolio because they really like Costa Rican forestry. They recommend it for one reason – £££££. The client takes all the risk and the scamviser gets all the reward.

  2. “How did Shearer find his adviser?”

    Probably through his agent who will have received a nice kickback.

    Dodgy advisers are a huge problem in professional football. (Assuming you consider young men with huge amounts of money potentially losing the lot to be a problem. If you think that someone with a huge amount of money can’t possibly have a problem, then let me remind you that mo money, mo problems.) The Secret Footballer has written on it in the past.

    The dodgy advisers are introduced to young footballers who have no idea about the financial system, and no-one they can turn to for a second opinion. Quite naturally they tend to trust anything they say because they don’t know any different and don’t know why they should know different.

    If UCIS is all that Shearer has had inflicted on him then he is one of the lucky ones. Many have been encouraged to leverage themselves to invest in property and if they suffer an injury and the investments go sour, they are stuck with the mortgages. Or invested in tissue-paper tax avoidance schemes and been stung by HMRC penalties that dwarf the amount they put in.

    It is a massive scandal, but nobody bothers about it because the prevailing consensus is that the working-class oiks shouldn’t have been given all that money in the first place, and if they lose the lot it’s their own fault.

  3. Neil Liversidge 30th June 2017 at 1:02 pm

    Too right. I’ve been saying it for years. Plain vanilla never made anyone sick. We’ve been boringly making money for our clients for the entire life of our firm. We never put a single client into any of the disaster or scam scenarios of the last dozen years. Keydata, Connaught, Arch Cru – we dodged the lot, UCIS flops likewise. The biggest laugh is the know-it-all types who’ve sneered at me in the past, to my face in one or two cases, for using mainstream products. And where are they now? Bust, out of the business and in one case at least, on the lam. He who laughs last laughs longest. Boringly proftiable, that’s us!

  4. No Nick, I don’t think you’re being cynical to link the issue with commission.

    One comment I was happy to hear in my formulative adviser years was that UCIS are unregulated for a reason… This comment was made by a well experienced investment manager many years ago.

    Now, enough of this, let me get back to looking at the guaranteed 7% p/a+ return property investments that are filling my Twitter feed.

  5. Nicholas Pleasure 30th June 2017 at 1:33 pm

    You are going to have to find some fairly simple investments if you want the average professional footballer to understand them. A Post Office account possibly?

  6. I live by a very simple rule, handed down from my gran…..

    “Only wade up to your nipples when you know you can’t swim”

    I haven’t drown yet ….

  7. Many of the recent SIPP complaints are to do with the underlying investments not being suitable. The advisers claim to have “only provided product advice” or it was done on an execution-only or insistent client basis but the evidence says otherwise. Like you, Nick, I can’t understand why mainstream “vanilla”/regulated funds wouldn’t have sufficed. Pure greed from the advisers involved.

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