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MPs attack IFA advice on offshore savings

Treasury select committee MPs have criticised the quality of advice given by IFAs in the run-up to the Icelandic bank failures.

In a report into the failure of the Icelandic banks, the committee says: “Bearing in mind the heavy coverage in the financial press of Iceland’s fragility we would have expected offshore savers using independent financial advisers to have been advised of the changing risk profile of their savings.”

The TSC says it will be exploring further the role of advice to customers in its forthcoming inquiry into the banking crisis.

It also recommended that the FSA publishes a list of all bank and building society accounts available in the UK and regulated in part by the FSA which would be covered by the Financial Services Compensation Scheme.

The MPs have called for charities that have lost money as a result of the Icelandic banks’ collapse to be compensated, but not local authorities or British Citizens depositing money in jurisdictions outside the UK Government’s direct control.

Aifa deputy chair Amanda Davidson gave evidence to the TSC in February and argued it was not the case that every client of an IFA seeks advice on savings accounts as many manage their own cash accounts.

Also giving evidence to the committee, Aifa director general Chris Cummings said that, for clients who wanted very low risk deposit accounts, offshore investments were not appropriate.

He said IFAs would have explained the notion of risk in offshore accounts and the level of protection that they get.

Responding to the TSC’s report, Cummings expressed disappointment at the criticisms of the IFA community.

He says: “We are disappointed that the committee did not feel that IFAs brought the changing risk profile of Icelandic banks sufficiently to clients’ attention as we feel steps were taken to ensure this happened.”

Cummings adds that Aifa had been pleased to have been offered the opportunity to give evidence to the committee and found the MPs well-briefed and focused on holding the banking community to account.

He says Aifa is looking forward to submitting further evidence to the committee on the role of IFAs as it pursues the matter in more detail.

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