The MPs’ report, published earlier this week, said that, bearing in mind the heavy coverage in the press of Iceland’s fragility, it would have expected offshore savers to have been advised by their IFAs of the changing risk profile of their savings. The MPs say they will explore further the role of advice to customers in its forthcoming banking crisis inquiry.
Aifa says it is disappointed with the committee’s findings as it believes steps were taken to inform clients and is looking forward to providing further evidence to the committee.
Perhaps the MPs should have asked awkward questions of some of the offshore bond providers which have to bear responsibility for their products and the way they are marketed.
Aifa argues that providers have the responsibility of ensuring products are fit for purpose, well targeted and of informing the market if the risk profile changes.
The issue is further clouded by the fact that some providers operated an open architecture offshore bond while others had KSF IoM as part of a panel of providers within their bond.
The fact that certain providers, such as Standard Life, would not allow the bank on its panel after due diligence while others continued to have it on panel after concerns regarding Icelandic banks were widespread needs to be highlighted.
Research conducted by Money Marketing in the aftermath of the KSF IoM fallout also revealed wide variations regarding the information given to consumers in marketing material about the lack of protection should an underlying bank go bust.
This information should have been provided clearly alongside the mouth-watering interest rates the Icelandic banks were offering, which were being promoted on some of the offshore bond providers’ literature.
The issue goes to the heart of the debate on provider/adviser responsibility that the FSA has been leading in recent years.
It is wrong for providers to reap the benefits of IFA distribution when money is rolling in but then be nowhere to be seen when problems occur.
The current focus of attention must be on ensuring as much money as possible is returned to investors through the ongoing KSF IoM administration process.
But some providers will have searching questions to answer if investors suffer heavy losses.