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Nic Cicutti: Poor advice is poor advice, however old

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When I was a young lad many years ago, I had the misfortune to attend a single-sex Catholic college. Apart from a few sixth-form classes shared with the local convent school, the only other concessions to anything resembling a mixed adolescent environment were a joint debating society and a French film club.

There, we were allowed to mingle with members of the opposite sex on alternate Friday afternoons. As a result, many of us boys found ourselves attending showings of obscure 1950s French movies and engaging in oratorical combat in front of small assemblies of pubescent lassies.

From memory, I don’t recall this devotion to the cinematic works of Jean Renoir, or engaging in stilted debates under the forbidding gaze of our respective English teachers, ever having the desired effect – namely that of being able to snog someone of the opposite sex.

Never mind: ever since then I’ve always had a soft spot for sub-titled films. Another plus is that I also learned to recognise a few rhetorical devices often used in public debates, something that has stood me in good stead over the years.

One of them is wilful misunderstanding, the misinterpretation of someone else’s words on purpose, often to make an unrelated point. In the words of one writer, it is “the unique ability to listen to one story and understand another.”

A classic example of such a rhetorical device came last week, when I wrote about Heather, Moor & Edgecomb, a firm of Wiltshire IFAs who advised a British Airways pilot in 2001 to abandon his generous final salary scheme and transfer his money into a private pension instead.

I wrote of how a company gave growth projections that were significantly higher than those permitted by the then regulator, the Personal Investment Authority.

Projections, incidentally, which even given a 9 per cent compound annual growth assumption over a whopping 22-year time frame, showed that total disbursements to the prospective client were barely £50,000 higher between the BA scheme and the private one.

Bear in mind that the starting retirement income for this former BA pilot from his final salary scheme was guaranteed to be £25,000 a year, index-linked, and would be more than £35,000 today with inflation. So the final disbursements involved over that time frame for either scheme ran to significantly more than £800,000. That much risk for relatively so little return?

These projections, by the way, did not take into account the effect of charges on growth in the fund. I have been in contact with Skandia, the company providing the drawdown scheme, and am informed that its annual management charges were 1.5 per cent.

In effect, the pension would have had to deliver compound annual growth of 10.5 per cent for 22 years to deliver the higher total disbursement I referred to earlier. By the way, the IFA was offering these projections in the aftermath not just of the 2000 world stock market crash but also the 9/11 terrorist attack on New York and the Pentagon.

Skandia also tell me that the standard commission for this little piece of business would have been 3 per cent of the sum invested, with an additional 0.5 per cent in trail payments. The client in question transferred a sum just short of £500,000 into this scheme, so it was clearly a very lucrative piece of advice for someone.

I also pointed out that back in 2008, this particular financial adviser was idolised by the IFA Defence Union, to the point where it actually backed a call for IFAs to contribute their own hard-earned money towards a legal action being mounted against the Financial Ombudsman Service.

Nor was this case of advice an isolated one. In fact, it was virtually identical to another that was tragi-comically defended in the pages of Money Marketing by a leading exponent of IFADU. That particular case went all the way to the Court of Appeal where the fair manner FOS conducted itself was unanimously upheld by judges.

Given all the above, what was the reply last week to my argument from one of that particular IFA’s longstanding public defenders? “Aha, another example of Nic having his little dig by dredging up some historic matter and using it to assign some credibility to his long-standing hatred of the IFADU and the widely supported campaign for the restoration of the longstop.

“It would be interesting to know whether Nic believes that the removal of the longstop defence for builders, surveyors, architects and the legal profession should also be contemplated.”

In other words don’t admit that your support for this IFA was a huge mistake and, instead, try to describe it as “dredging up some historic matter…”

Which brings me to my final point, and it is a simple one: poor advice is poor advice, whether five, 10, 15 or 20 years out. To deny someone whose retirement dreams have been shattered the right to obtain redress through a longstop is morally indefensible.

Those who defend the idea should be ashamed of themselves.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

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Comments

There are 25 comments at the moment, we would love to hear your opinion too.

  1. Nic back to his normal winding people up. I am surprised that Citywire haven’t tried to recruit him as this is going to be a very long list of responses to Nic’s misdirection.

  2. Nic clearly you are missing the point here – whether this is deliberate or not I will leave it to the readers to decide.

    This issue here is that yes, poor advice is poor advice no matter how long ago it was.

    However, other ‘professions’ benefit from a long stop which means for example if client received, in retrospect bad advice from a solicitor regarding a personal injury claim, they cannot go back twenty years later and make a claim against the solicitor.

    What are asking for is the same treatment, in accordance with the statutes of the land, as other professions.

    Not too much to ask is it?

  3. Although I am no great devotee of a long stop (admittedly it is a nice to have) on this topic I just cannot agree with you Nic.

    Your views are redolent of the modern compensation culture world in which we live.
    One must ask why someone is so careless of their own affairs that it takes them more than 15 years to discover their dissatisfaction? Why don’t people review their affairs? Excuses of why not tend to ring very hollow.

    Not just in our field by generally across society we have those who are careless, lazy and on occasion downright dishonest seeking to pass blame for their own shortcomings and lack of responsibility and self-possession.

    We seem to be living in a money for nothing society, led from the very top (Westminster expenses!)
    Perhaps it is just a factor of age, but I really cannot recall such venal attitudes (all round) as exist today.

  4. I only came here for that clickbait of a headline! Talk about lighting the blue touchpaper! Echoing other commenter’s sentiments poor advice is of course poor advice, but context is important.

  5. “From memory, I don’t recall this devotion to the cinematic works of Jean Renoir, or engaging in stilted debates under the forbidding gaze of our respective English teachers, ever having the desired effect – namely that of being able to snog someone of the opposite sex.”

    Really? I would have thought that after an hour of listening to the young Cicutti N orate on the motion of “This House believes that you are all useless criminals and should be ashamed of yourselves but first let me tell you about what I did in my shed over the weekend” the convent girls would have been swooning in the aisles and swarming the stage, crazed with animal lust.

  6. Let’s think of the other side to this as well. A layperson seeking professional advice and service, which they then rely on. For that person to then be able to hold the professional accountable if it was wrong or poor is, to my mind, completely acceptable. You were paid for it, you’re liable for it, no?

    The argument that ‘other trades can use the longstop’ instead smacks of ‘but they can get away with it’. I’m all for caveat emptor and responsibility for your own affairs, but lets strike a reasonable balance here.

  7. You are not addressing the issue which is the Rule of Law as applied in the UK. The “the law is king” and this reverses the traditional rex lex (“the king is the law”). The regulator is abusing what many dictatorship before have sought to abuse.

    The regulator is not the law no one is above the law not even the FSA/FCA. You seem to feel you can make law up on the hoof. The uncertainty caused by open-ended liabilities prevents advisory firms becoming tradable assets and hinders firms’ ability to attract new sources of capital. No one wants to buy or invest in a business with open ended liabilities and that is why in law we have the Long Stop and Statute of Limitations.

    The net result of your attitude will be a State Run Financial Services industry, the regulation of the free press and a move towards a totalitarian state – indeed, we are three parts of the way there with the FCA.

  8. The reason for the longstop is that after 15 years peoples memory of events tends to be somewhat inaccurate.
    Many of my clients can’t even remember what they had for breakfast let alone a conversation 15 years ago.
    The law recognises this hence the longstop,
    We are faced with the FCA/FOS/FSCS taking every word from a clients statement as gospel and anything said by an adviser needs to be backed up by written evidence. OK for current policies but not always so easy for something written 20 years ago.

  9. If I remember correctly, Nic has admitted (like most politicians) to being a former weed smoking public school boy who has now chosen leftism over common sense.
    Common sense says a longstop SHOULD apply.
    In Germany they have a 30 year longstop. Many adviser are NOT arguing over the number of years, they arguing over the lack of any certainty (LAW).
    It is an abuse to set oneself up in judgement over others to infinity and beyond. There is supposed to be a “Last Judgement” in many religions, so for any system to reserve judgement until after that is pretty rich (which might be why Hector got stressed out in the end)

  10. Nic has the benefit of not being regulated in any shape or form and is party to the fourth estates rant against any regulation.

    Do as I say not as I do.

  11. Again, Nic’s colum makes for an interesting read but serves little purpose other than to stir up emotions and generate a reaction, so I guess its job done on his part.
    As ‘bridge north’ states Nic hasn’t had the direct experience that many of the readers and comment makers have and therefore it is hard for him to fully comprehend what is actually happening in the day to day life of an adviser.
    His argument for redress is of course logical in an ideal world, why should a client who has received poor advice not entitled to some form of recompense, but the water can get very murky over time and the thought process can change and for every valid case there are hundreds who will be looking to try and make a quick buck, and as Harry Katz states, it should be clear in most cases that if there has no indication of poor advice or reason for complaint within 15 years then what has been going on during that time that no-one had noticed?

    I have a number of FA football coaching qualifications but I am sure if I were to walk into the FA’s offices and start to dictate the rules or coaching methods without any real worthwhile experience I would receive short shrift. It’s one thing to have an understanding of the rules, it is something completely different to start writing them.

  12. @ Daniel
    “The argument that ‘other trades can use the longstop’ instead smacks of ‘but they can get away with it’. I’m all for caveat emptor and responsibility for your own affairs, but lets strike a reasonable balance here”

    Parliament debated this matter at length (unlike the FSA which failed to consult or discuss and removed the longstop defence on a whim). Parliament held that 15 years represented the appropriate balance between the rights of the consumer and the risks inherent in relying on events and recollections of long ago.

    Recently there has been discussion of reducing this to 10 years.

    Regardless of the rights and wrongs we simply want the same protection – not more or less – as afforded to every other business and individual.

    We all know Nic is a wind-up merchant and it suits his purpose very well to instigate argument and turmoil.

    After all, that’s why Money Marketing retain him.

  13. Nic you quote -:
    “Which brings me to my final point, and it is a simple one: poor advice is poor advice, whether five, 10, 15 or 20 years out. To deny someone whose retirement dreams have been shattered the right to obtain redress through a longstop is morally indefensible”

    On face value this is correct, however ! progress is progress I have been doing this job for the past 22 odd years, and how I was researching, advising and recommending is a million miles away from what I do today, hell suitability reports were 2 or 3 pages ! and probably more holes in them than a fishing net.
    Does that in turn mean that the advice I gave back then or years gone by was poor ? maybe it was but I used the tools available to me as best I could, we had nowhere near the software, information and speed we have today, but I would stand by my advice !! would it get past a FOS decision ? I doubt it

    But then you cannot ever make up for people who knowingly lie or mislead, these things will always be.

    My point is things change, progress is made (for better and for worse) my house is nearly 500 years old the building techniques must have been very basic (by todays standards) would it pass the test of todays building regulators I very much doubt it ? if it falls down tomorrow would I expect to sue the builder ? or whoever took on his clients ? or have a safety net like FSCS ?
    This is my home and the most expensive thing I have bought or own !!.

    In your words !!!
    “To deny someone whose retirement dreams have been shattered the right to obtain redress through a longstop is morally indefensible”
    I do hope to retire in my house and long may it stand for another 500 years, but no redress for me if it does fall down.
    (but I have insurance)

    That I pay for !! not the builder !!!!

  14. MM have edited my comment as it appears you are not even allowed to mention Hector Sants in it anymore. Remove the name, NOT the whole post please. It was NOT close to the knuckle and as I have told Paul Mcmillan before I have suffered from stress in the past (and probably will do so again at some point) and while being nasty or libellous about it is I accept over the top, commenting on it should be allowed in a free society.

  15. The Germans have a 30 year longstop, but my post was removed by MM due to comments about a former head of the FSA (not the Nazi party, the FCA)

  16. My comment implying Nic C was a pot smoker were originally moderated. (I have no significant objection to smokers whether of tobacco or other products, but I do object to crusading zealots whose choose to ignore the law who then demand we waive or by slight of hand remove our legal rights)

    Here you go;

    In Nic’s latest article above he was throwring dirt at all advisers and especially HME withotu giving HME the same platform to defend themselves (yet again) from mud slinging. I know nothing about the HME case, so will not stand in judgement nor condone their advice, BUT

    Nic can have back some dirt of his own making.

    The difference between him and HME is that he has publicly admitted to a criminal offence (which he didn’t get caught for, which is a bit like me and speeding as the only fine I have ever had I think is for not returning my library books on time!) and is selectively haranguing IFAs who have committed no criminal offence and have often neither been held accountable under civil law.

    The right to claim a defense of the 15 year longstop IS civil law and the FOS choose to ignore it. So I put them in the same camp as Nic C who selects laws to suit his leanings.

    http://www.moneymarketing.co.uk/opinion/nic-cicutti-advisers-need-a-clear-message-to-be-able-to-regain-trust/1073118.article

    Nic said “Now, although I’ve enjoyed more than my share of alcohol and both smoked and inhaled dodgy cigarettes occasionally,”

    I couldn’t Nic without getting sacked for 16 years. Random drug testing in the military meant the choice was smoke a spliff and get caught and get sacked OR just don’t bother. I chose the latter, but like Jon Tiner former head of the FCA who was banned for drunk driving, it appears only some of us play by the rules.

  17. Sounds good – but what about someone whose retirement dreams have been shattered because they cannot defend a complaint about something that happened 25 years ago because the regulator chooses to ignore the Law.

    As Alan says, Parliament decided that 15 years was an appropriate balance – and it did so at a time when it also passed a piece of legislation called the Financial Services Act 1986. So it is reasonable to suppose that took that into consideration at the time. I even found a speech in Hansard that referred to both – made by the Queen, no less.

    So if it is good enough for the Queen, why is it not good enough for the FCA, FOS or Nic?

  18. I have been asked where the Queen’s speech which refers to both the long stop and the Financial Services Act can be found. It is at http://hansard.millbanksystems.com/lords/1986/nov/07/prorogation-her-majestys-speech.

    Search for “Legislation has been passed for England and Wales to set fair time limits for cases involving latent damage” and “Legislation has been passed to extend and reform the regulation of investment business. This will protect the interest of investors while encouraging the continued development of strong, efficient and competitive financial services.”

  19. Let me add to Peter’s comments in stating that a perusal of Hansard, committee minutes and any other sub-committee minutiae will confirm that the longstop was never discussed when FSMA 2000 was being debated and voted on.

    IT WAS NOT MENTIONED.

    The FSA took the unilateral decision to remove the longstop defence its single rationale being that its own General Counsel “believed it was Parliaments intention that it should not apply.”

    The FSA has refused every request for sight of this advice.

  20. Alan’s comment is also interesting because I know that OFGAS, one of the forerunners to OFGEM, insisted that its powers were restricted to acting with what Parliamentary legislation stipulated.

    On the other hand, OFGAS was part of the Civil Service and recognised that it was not a law unto itself.

  21. Is Nic trying to resurrect IFADU? He appears to be obsessed, or is it possessed?

    The FSA said nobody could override statute, that is the law. The 15 year long stop has not been repealed which means the regulator must be acting ultra vires. However, the courts have said that was the intention of Parliament and others say the contract between the regulator and the regulated is binding and the FSMA 2000 and its replacement were devoid of any mention of the long stop.

    Solicitors can escape after 6 months, advisers are exposed until their estate is dispersed which often finds the surviving spouse dealing with rabid lawyers, or worse still the FOS

    Yes, poor advice is poor advice, however old, same goes for journalists.

  22. Are you suggesting Nic that consumers should be free indefinitely to pursue advisers in any field, i.e. effectively hound them to the grave? Is it right or just to selectively (and vindictively) deny FS intermediaries any sort of longstop? Would you, by the same token, have it confiscated from all other professions such as architects, doctors, surveyors, manufacturers, car mechanics, builders, restauranteurs, electricians and absolutely everyone else? What is your justification for singling out FS intermediaries?

  23. I do agree with certain comments re: caveat emptor. However, with pensions, it could be 20-30 years before you realise you have been poorly advised, and it seems unfair that at that point you would have no recourse.

    Would it not be sensible to have a system whereby you had the length of the contract plus one year to make a complaint about the product?

  24. @Matthew

    What do you mean by “the length of the contract”. I have seen a case where an ambulance chaser resurrected a complaint about a policy that was surrendered in 1996 and only complained about in 2011,

    FOS decided to uphold it despite the Data Protection Act having forced the adviser to destroy all documentation that might have defended the advice.

  25. @Matthew – That is in different to an architect who designs a building which is flawed, but doesn’t collapse until 15 years and 1 day or a builder who installs an internal wall mounted boiler with flues which do not match the then building and Gas Safe regs which then results in serious injury at 15 years and 1 day. It is a civil case if it doesn’t result in death and only becomes a criminal case if the person dies and yet because only LET properties have to have an annual safety certificate an owner occupier might not pick up the problem EVER and yet they are timebar at 15 years and the ministry of justice were consulting up until 2010 on REDUCING the longs stop for every profession to 10 years ( just FSMA dropped mention of a longstop from the rulebook).
    Personally I don’t mind whether the longstop is 10 years, 15 years, 1 year after the end of the contract or what, I just do NOT accept an infinite right to judgement by the FOS and if I retire at 67 or even 70, and they ant to pursue me after the end of the long stop, i.e. age 85 +, then they need to be prepared and warned now as to how I am likely to react to an attempt at holding me to account contrary to common law.
    DO NOT I repeat DO NOT do business with me if you are unwilling to accept common law. Infinite judgement is NO LAW so if I do not have any defence in law, then I am an outlaw and I have nothing to loose. Fortunately I am only 48 so the F – pack have got a while to back down. Their choice, they have been warned.

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