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Sandringham boss: Independent advice has helped drive FSCS levies up


Independent advice has contributed to higher Financial Services Compensation Scheme levies because advisers have been allowed to pick high-risk investments, Sandringham chief executive Tim Sargisson has said.

Sargisson tells Money Marketing that by running a strong centralised compliance process, restricted advisers could screen out some of the unregulated or illiquid investments that have seen compensation claims fall on the lifeboat fund.

Sargisson says: “Independent advice has driven the FSCS levy higher because of poor investment decisions and poor investment strategy.”

“The restricted model ultimately assures people don’t end up in a lot of trouble in future.

“If clients are losing money due to dodgy investments you need a more robust process to stop that happening.

“Whether restricted or independent as a business you have a responsibility that you really understand what you are putting your clients in to before you do it.”

Sargisson also questions whether clients really do favour receiving independent advice over restricted.

He says: “It has become a very polarised debate: independent is good and restricted is bad. People are wedded to the ideology of being independent without understanding what it means for the business. How many of you clients really desire you to be independent?

“If your client demands independent advice and they are paying, great. But for majority of the clients we see the restricted model works very well.”

He also says that the fact that restricted firms are not on average cheaper than independents is down to the charges vertically integrated firms levy.

“On the one hand you have restricted advisers, on the other vertically integrated businesses looking to take a bit at every stage of the food chain. It means restricted ends up being as expensive as independent.”

Share moves

The first 200 advice firms to join Sandringham, which currently has around 160 firms, are given a 5,000 share stake in the company, but Sargisson says this could be extended as the firm targets 250 firms.

He says: “We might push that 200 figure up…My view is very clear, we don’t want to be bigger than 250 though, its manageable and your back office systems are robust.”

The firm is still bringing in members on an ad-hoc basis, but Sargisson does not rule out a group acquisition.

“It’s still very much an organic process, we are in the business of acquiring firms. However, if the right opportunity came along and our investors were happy to provide funds for a kind of capital event then great.”



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There are 24 comments at the moment, we would love to hear your opinion too.

  1. I am not sure that I agree with Mr Sargisson on this. It is poor advice by firms that then fail that is driving up the FSCS Levies. It has little to do with the fact that the failed firm was operated as an Independent or Restricted advice firm. Let’s not forget that there are many ways that a firm can become Restricted and still advice on UCIS, NMPI and alternative investments. These products are not exclusive to Independent Adviser. Whilst I agree that Restricted propositions, that exclude access by advisers to esoteric products, helps to prevent the client from becoming exposed to inappropriate products, the main purpose of any Restricted proposition is to de-risk the business of the firm and deliver a robust and repeatable process that delivers good consumer outcomes each and every time.

  2. What a load of twaddle! It’s dishonest people who push up the levy.

    Still I have a broad rule of thumb, never trust a man with a beard!

    Manson, Sutcliffe, Shipman, Bin Laden & Harris. I rest my case.

    What a l

  3. I hate these sales pitches. Self interest and twisted facts to get free advertising should be at the top of the list of things the FCA clamp down on.

  4. Having read the headline I knew this would be a restricted offering pushing a model of some sorts.

    The issue with the increased FSCS payments is not independent advice. The issue is unregulated investments being sold by unethical individuals looking to gain commission. These advisers could be restricted or independent. The issue being that until unregulated investments, which were never intended to be protected by the FSCS are removed, even if advised by a regulated adviser the cost will continue to rise. What is needed is an additional sub class of permission to be able to recommend unregulated investments and regulate SIPP offering, or have at least regulated only investments SIPP offerings.

    Why is something so simple taking so long to resolve? The advisers know the problems, we offer the solutions and are told it cannot be done or its not that easy. Please tell me WHY?

    • I agree with you. I hope Sandringham paid for the adverts as they are talking bollards and it would appear they either don’t understand the post RDR definition of independence or have chosen to pretend they don’t/
      Independent simply means an open mind to Retail Investment products with no pre-meeting restrictions.
      I seriously thought about going restricted Pre RDR and I may till do so, but it will be on my own terms if I do and to match the needs of my client base as the vast majority of my clients don’t need me to be Independent in fact probably NONE of them NEED me to be.

  5. I agree with Phil, this is a rubbish article/viewpoint and as everyone else has mentioned, it is not regulatory status but the motives of those who continue to churn out rubbish that causes FSCS levies to rise. This and the fact that the FSCS has and probably still does allow firms into ‘default’ only to see them Phoenix.

    Oh and Phil, I bet he wears brown shoes for business!

  6. I couldn’t disagree more. Bad advice isn’t a result of one particular offering. If a restricted firm gets it wrong then the outcome will be more systemic and of higher impact. It is completely wrong to associate Independent Advice with rising FSCS costs. This profession was built on Independent Advice and that still remains the favoured choice of most advisers. Yes, restricted models have their place and should be respected for the value they bring to certain firms, however this goes both ways. You can’t blame the increasing levies of an entire profession on Independent Firms. I am equally sure, that in years to come, you will see many restricted models come under scrutiny for the ways in which their restrictions have led to expensive products and poor client outcomes. Many clients value Independence and most advisers these days have the proper systems and processes in place to assess risk and provide an independent, robust and compliant investment process. In case this is in any doubt, at Simply Biz we provide 4000 licenses of this kind of system free of charge to our membership to do exactly that!

  7. Do Sandringham use the AEGON platform and do they have others they use also? Just curious

  8. Chaps please don’t rise to this bait. The best way to show your thoughts on this matter is to leave it with as few comments as possible.

  9. Self-serving, self-interested rubbish from a senior manager at a restricted advice business.

    A business can be restricted in so many different ways (product type, business area, limited providers etc) – the comments are a crass generalisation. It is the selling of inappropriate products that is the problem & this could be done by restricted advisers as well as independents. If an “adviser” is that way inclined, I doubt his notional status will be something that bothers him.

    Please, Mr. Sargisson, can we have less of this, more professional & balanced comment? It’s not the first time I have seen this type of commentary from you – for a “leader” in this profession you are not setting a very good example.

  10. Nicholas Pleasure 20th January 2017 at 3:24 pm

    On the other hand, clients of restricted advisers may have to suffer an also-ran product and miss the opportunity to be in the investment that is most suitable to their needs. It makes life easier for the adviser, but clients are likely to get a poorer deal from time to time.

    As has already been said, it’s not being an IFA that is causing the increased FSCS levies, it’s being a crook.

  11. The FCA’s effing useless GABRIEL system hardly helps. In every walk of life there are crooks and cowboys, always have been, always will be. It’s the job of the regulator (and ours is a very expensive regulator) to identify, home in on and swiftly put a stop to bad practices, particularly uninsured ones. Its long running list of failures in this area are what have have allowed such massive liabilities to fall on the FSCS.

    And being a WoM IFA (or selectively restricted in just a couple of areas) does not, as this Sargisson bloke obviously wants to imply, constitute a wide open playing field for selling any old toxic rubbish. Go with the right network (either as a full member or remain DA but using whichever of their resources you want) and they have well researched panels of quality products from quality providers.

    Safety doesn’t mean limiting oneself to just those providers with which Sandringham has struck cosy deals.

  12. In a world where opinion is touted as fact (post truth politics) we need to be very careful with points such as this and therefore the question needs to be how this can be evidenced – perhaps via a FOI – whereby what was the nature of the advice behind claims against the FSCS – non-advised, restricted/tied or independent?

  13. The FSCS levy is rising due to dodgy advice and much of that advice was given by ‘IFAs’ in that Mr Sargission is right but the vast majority of these case date back some years to pre RDR days when there was no such regulatory distinction between IFA and Restricted. Indeed the term Restricted didn’t even exist.

    Much of that advice was perpetrated by advisers of network businesses as it was by DA businesses that is why so many networks failed not least Sesame.

    Points have been raised that Restricted businesses can run more as well in that any problems will systemic and reach across a large number of clients. They generally (at least in the network type model) have in house funds and products that are not cheap so that could lead to complaints, there is already talk in the US of legal action where expensive active funds have been taken by pension scheme trustees over much cheaper tracker alternatives. Lastly there is the risk of shoehorning clients into the products and funds the restricted adviser have available when they don’t have access to a product of fund that would be better for the client. How many of these fully Restricted advisers ever refer clients to an IFA? Yes thought so.

    Lastly if restricted advice is so good, simple and risk free why is it that the largest Restricted business, SJP, is also the most complained about (even factoring for size).

    Mr Sargission – WAFT, I strongly suspect that if he ran an IFA business he would be saying IFA is brilliant, all clients want it, its the best thing for clients, Restricted it rubbish, overly expensive and gives poor client outcomes.

    • I agree with you,from 1988 until 1992 I worked for a bank who stated “Independent is best” and that with profits smoothed risk and unit linked was high risk.In 1993 the bank decided it could make more money as a tied firm and you guessed it….they decided that tied and uni linked was the only way to go. Then I realized that managers LIE and you simply need todecide whetehr you work for the client (who pays you ultimately) or the supposed “employer”. if we give advice to the consumer, then we are agent of the consumer and not our employer. You can’t be the agent/adviser for both parties it’s a clear conflict of interest and what RDR was supposed to have resolved.

  14. Absolute nonsense.

    If the firms he is referring to tagged themselves honestly they would be restricted firms – restricted to flogging dodgy unregulated investments in Cape Verde.

  15. If people (presumably IFAs) could get past their understandable indignation about the article then there is a valid point hiding away in here. It’s a simple fact that someone in a position to advise on dodgy investments is more dangerous than someone who is not. So, whilst I agree that it’s the crooks (and uneducated/ignorant advisers) that are the problem, it’s more likely to be an IFA in the same way that people with free access to guns are more likely to use them inappropriately than those who don’t have access.

    However, that’s as far as it goes and In the wider scheme of things it’s not the IFA/restricted argument above that makes any material difference. It would be a better idea for the Government/FCA to place much stiffer restrictions on the sale of non-mainstream investments for both IFAs and restricted advisers, e.g. make it a presumption that they unsuitable for a retail client unless the adviser can prove beyond doubt (I use those words carefully) it is suitable. And make it an offence for unregulated advisers to recommend ANY collective investment, unlisted security or commercial property scheme. I’m sure there are other creative ideas that could be employed.

  16. On the contrary regulatory risk is more to do with scale and diversity of advice. If you have a Network or direct sales force all selling the same products en masse to a large sector of the populous en masse then you have a great regulatory risk that a small IFA selling to a small group of clients. History of misselling in the UK proves that the greater risk and volume of complaints comes from banks and direct sales forces.

    • That’s not regulatory risk that’s concentration risk, Regulatory risk is the risk that regulations change to such an extent that is affects your business model.

  17. Surely, a product not fit for purpose should not be approved for sale by the regulator? It should not be possible to sell a high risk product and if it is deemed appropriate then the regulatory fee and PI should be commensurate with the risk. This in turn would make it economically unviable to operate in this market. Further the legal right to protection under the Statute of Limitations and Longstop should be made available to IFAs who thereafter would be discouraged from the practice of Phoenixing and passing on liability to the FSCS.

  18. @Phil Sipocz What a thoroughly unprofessional thing to write and commit to the internet forever now online for all to view when googling your name. I presume that that none of your clients, friends or associates have a beard. Regardless I’m sure they would be appalled by a fellow professional posting such comments on a public platform.

  19. You do all realise that this bloke is actually David Brent playing out his new sitcom. I don’t think it will be very popular

  20. Robert Milligan 9th August 2017 at 3:29 pm

    Sargisson, after thirty years as an adviser, 17 as an IFA I am yet to have a single compliant, I would be happy to stand noise to noise and discuss your comments, unless you can emphatically uphold your comments, you should be sacked. MD of FCA401101

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