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Martin Bamford: Root out failed advisers and spend our levies properly

Martin Bamford For the casual observer reading the financial press, you would think our profession is full of schemers, scammers and crooks.

We have got Port Talbot sounding like a disaster relief zone, fraudulent storage pod operators calling investors from the Costa del Crime and even a large bank causing “material financial distress” to some of its small business customers.

If you manage to avoid losing your pension benefits to this latest round of scammers, then there is always the cryptocurrency entrepreneurs ready to part you from your hard-earned cash. Those touting such trading strategies might not be regulated advisers but it does not really matter to the typical consumer, who sees “financial” in the story and assumes it is all the same thing.

There is a perception versus reality issue at stake here. As professional, ethical advisers, we know the vast majority of clients are getting a good, safe experience. They are not being flogged the sort of high risk, esoteric, overseas junk investments that inevitably result in a loss.

No, the majority are having their financial goals satisfied via carefully-considered plans and the use of regulated, dare I say boring, investment strategies. This is how it should be.

But we do need to contend with the collective damage to the reputation of our profession caused by the actions of a relative few. The press will always report bad news, especially when it revolves around losses due to unsuitable recommendations made by a trusted adviser.

Even with the best regulation in the world (which we are a long way from having here in the UK), we cannot expect these stories to disappear. That said, there are some simple steps we can take to make things better.

The phoenix has to stop rising again

Firstly, this “phoenixing” nonsense has to stop. Where an individual is a director of a regulated firm which goes into liquidation and leaves liabilities behind for us to pay for via Financial Services Compensation Scheme levies, the FCA needs to thoroughly investigate them before they are allowed to work in financial services again.

The same goes for individual advisers at a failed firm. But rather than an inquiry, it is the professional bodies that should be checking their position before granting a new Statement of Professional Standing.

Secondly, we need to explore the inherent biases caused by the way we charge for what we do. One of the wonderful things about retail financial services is its diversity of business models and charging structures, which encourages innovation and price competition.

But the Work and Pensions Select Committee was right to raise the issue of contingent charging, especially for higher risk advice areas like defined benefit transfers. Its use should be allowed to continue on the proviso that advice is peer reviewed by a randomly selected adviser.

Better advice needed on the ground

Finally, it is time we see the levies for services used to deliver something genuinely helpful for those unable to access advice. This does not mean building more websites, but individuals on the ground sufficiently equipped to deliver advice.

The Money Advice Service had a budget of £15.9m for money advice and £42.2m for debt advice in 2017/18 but it took a group of volunteers to spend days in Port Talbot offering guidance to members of the British Steel Pension Scheme.

These are not big things to make happen. Without change, all we can expect to see in the future is what has happened so often in the past.

Martin Bamford is managing director of Informed Choice



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There are 7 comments at the moment, we would love to hear your opinion too.

  1. For nearly 30 years successive regulators have failed dismally in seeking out the crooks and conmen and are always shutting the stable door whilst flexing their muscles and telling the public that they are on the job.

    It isn’t that difficult to suss when a firm may be dodgy. Most competent advisers would be able to make an assessment from a glance through a file. The FCA has Touchstone and the Gabriel returns to use as a filter. they can also ask fund managers, etc for details of sales made and use this as a gauge of who may be worthy of closer scrutiny.

    Martin is correct that these issues reduce consumer confidence and they also encourage claims mongers to focus their efforts to the detriment of us all.

  2. Totally agree, but the starting point has to be one governing body for regulated financial advisers. Until we are all under one governing body, one voice, one set of rules, one body to fight our corner, little will change.

    • APFA claimed to be the body fighting our corner but it didn’t really fight at all. Its endeavours amounted to nothing more than trying to lobby and negotiate with the regulator, in which regard it (mostly) failed miserably because the regulator knew it had the whip hand and was under no obligation to give an inch of ground on anything ~ so it simply didn’t. Its discussions with APFA were nothing more than a bit of token window dressing, of which there is no better example than the subject of the longstop. Having been strung along for years with no real prospects of achieving anything, APFA’s failure on that front was the final nail in its coffin. It just couldn’t or wouldn’t wake up to the reality that trying to negotiate with the FCA is a waste of time. Even Andrew Tyrie’s efforts to hold the FSA/FCA to account were largely and humiliatingly fruitless, whilst Nicky Morgan has had to threaten the FCA with contempt of Parliament over its persistent stonewalling on publishing the full and unredacted version of its report on RBS. Instead of doggedly pursuing a pointless campaign of trying to negotiate with the FCA, APFA should have sought alliances in Parliament. PIMFAA’s agenda looks set to be no different.

  3. Totally agree!

  4. No, better to keep these advisers and small business owners where they can be seen but not heard, give them some more paperwork to keep them occupied and charge them for doing it!

  5. In all walks of life there will be dishonest people. We often read stories about solicitors, accountants and doctors being struck off for unethical and dishonest behaviour.

    Whether someone is honest or not is determined by their character. No level of education or qualifications will change an individuals intrinsic nature.

    The solution to the problem is to create a system that weeds out the dishonest people before they can cause too much harm to consumers and the reputation of the adviser community. Such a system will never be a hundred percent successful. As there will always be people who set out to be dishonest and who manage to cover their tracks. That is simply an unpalatable fact of life.

    It is easy for me to sit on the sidelines and be a critic because I don’t have to deal with these problems. However, the FCA always seems to be behind the curve when dealing with such issues and only catches up with these individuals after they have done a lot of damage.

  6. Come, come Martin. Of much higher priority (for the FCA) than phoenixing is to investigate the (alleged) lack of competition between non-workplace pension schemes. It’s all about appropriate prioritisation, of which, sadly, the FCA appears to be constitutionally incapable.

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