There are many instances where advisers’ woes can be traced back to unregulated investments and/or unauthorised firms. From high profile fraud cases to the recent £20m interim Financial Services Compensation Scheme levy on life and pensions advisers, you do not have to look far to find references to “unauthorised business” or “non-standard assets”.
But despite the untold pain unauthorised firms inflict on investors, the damage they do to advisers’ reputation (and their wallets), and for all the FCA’s talk, the problem is getting worse.
Money Marketing first investigated this issue almost two years ago. Based on a sample of the latest FCA warning notices against unauthorised firms, 42 per cent still had a live website. Now, that figure has risen to 59 per cent.
Granted, the FCA has a mountain to climb. Unauthorised firms may be based overseas, and therefore out of the regulator’s jurisdiction. The scale of the problem means in the time it takes one firm to be shut down, five more appear in its place, like a kind of financial services version of the heads of Hydra.
But as pension freedoms loom, it is imperative the FCA gets a grip on the situation.
A quick Google search, for example, “cashing in my pension pot”, demonstrates the point. While information from the Money Advice Service and The Pensions Advisory Service features highly towards the top of the search listings, your eye is easily distracted by ads emblazoned with headings such as “cash in my pension now”, “read our free guide for advice”, “unlock your frozen pension” and so on. In amongst the noise are misguided headlines around using your pension as a bank account.
So what more can the regulator do? Well for a start, it makes sense to promote consumer risk warnings beyond the FCA’s website. Consumers need to know to go there in the first place, and a wider marketing campaign highlighting the risk of scams would go a long way to warding off consumer detriment down the line.
The industry also has to play a part. Advisers can do their bit, but hopefully clients that understand the value of advice are less likely to be taken in by rogue firms.
Providers can flag the risks as part of their second line of defence communications, and the Pension Wise organisations also have a role. But the FCA needs to take the lead – guidance providers have enough to cover off as it is. And in 45 minutes to boot.
Natalie Holt is editor of Money Marketing