Last week saw the latest sting on the Financial Services Compensation Scheme when a company neatly sidestepped its liabilities in a series of moves that would put a chess grandmaster to shame.
For nearly a year, we have seen legal firms tutoring IFA firms in this cleansing process. Out of curiosity, I attended one of their seminars and, although the plan was well thought out, I wondered just when the FSA will wake up to what is going on. What exactly is the FSA doing about this systematic abuse? If you can dump your liabilities in this way, what incentive is there for companies to comply if they can close down and set up with the same staff and the same clients?
What puzzles me is how their clients react to all this. After all, if these directors cannot run their own businesses, why would any half-intelligent client rely on their advice? Or is it more likely that these firms are just product floggers so the concept of client retention is very low in their scale of priorities? I leave you to draw your own conclusions.
At least when one of the other national IFAs did their deal with the FSCS, several of the directors had to give personal guarantees close to £1m. Although that deal was not perfect, there was an incentive for the directors to improve their processes and mitigate the losses to the FSCS.
Given that the leading insurers have invested in the original firm, is their investment a write-off or have they too found the exit door?
If we are serious about becoming professionals, then this needs to stop now. I call on all decent non-shirking IFAs to write to John Tiner and ask him why this is being allowed for firms over a certain size but not smaller firms. Ask him to prevent the directors of these firms being able to hold senior control functions for a minimum period of five years. If the FSA will not act, perhaps the Department of Trade and Industry should lead by example and go after them, based on their conduct as directors.
Let us get back to the basics, act professionally, respect our peers and, if you will not accept your responsibilities, get out of this profession as soon as possible.
Robert Reid is a director of IFA Syndaxi