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Small pension scheme put nearly half its assets into Lifemark

A small pension scheme was advised to invest nearly half its assets into Keydata life settlement vehicle Lifemark.

The Financial Mail on Sunday reports that a pension scheme for employees of Yorkshire-based  Micro Metalsmiths was advised to invest £2m of its £5.25m assets in Lifemark by a local IFA, Lampott.

The firm employees 120 staff and 50 retired workers are currently drawing from the scheme. It has already had to pump £160,000 into the scheme to keep it afloat, according to the Financial Mail report.

The report says Micro Metalsmiths is suing the IFA in the hope its PI insurer pays out on the losses incurred.

In a statement given to the Financial Mail, Lampott says: “As the trustees of the Micro Metalsmiths Retirement Benefit Scheme have lodged a formal complaint, until our investigations are concluded and reported to the trustees it is not appropriate for us to make particular comment in this case.”

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Comments

There are 28 comments at the moment, we would love to hear your opinion too.

  1. It is precisely this kind of poor quality advice and commission chasing that the RDR is trying to deal with and if any advisers still think that experience should excuse you from getting our so-called “profession” into shape, you should be ashamed.

    Unfortunately this is not an isolated incident and we see this type of report over and over again. The only way to make this type of incident an exception is to raise standards within the “profession”.

    I find it quite staggering that there is so much resistance to passing a few exams and adopting an open and honest policy with clients in respect of commission. In every other profession I can think of, a pre-requisite to becoming practicing professional is the attainment of the industry’s flagship qualification and the basis of how a client will be charged agreed at the outset.

    If you can’t or don’t want to raise the standard of our profession then please get out now and let those of us who do get on with it.

  2. Neil F Liversidge 25th October 2010 at 9:46 am

    Alan B – congratulations on taking such careful aim before you machine gunned yourself in both feet. Below is an extract from lampott’s website. As you can see, these re fee-based highly qualified advisers. Have a nice day Mr B!
    Here’s what it says: Richard Lamborn joined the industry in 1980 and trained with Scottish Amicable. In 1985 he joined a provincial broker and acquired Lampott Limited in 1993. Richard is an appropriately qualified (by advanced examination) pensions specialist and arising from his personal ethos is valuing and prioritising the needs of clients.

    Andrew Clarke joined the industry in 2000 following the completion of an honours degree, training as an IFA with Towry Law based in Leeds. He gained invaluable experience working in the City as an IFA with Sedgwick before returning to Yorkshire to put down roots. His determination for continued career progression within an ethical firm of pensions specialists encouraged him to join Lampott Limited in 2006. Andrew is a conscientious adviser dedicated to providing a bespoke and professional service to meet client aspirations.

    Our services are normally fee based however we are happy to be flexible in this regard and, with client agreement, will take provider commission as an alternative to fees.

    End of extract. Ex-Towry Law eh?

  3. to Alan B:

    We do not know how qualified the adviser was in this instance, the process followed or what the client’s input was.

    Either way I do not see how a qualification could have made a difference one way or another here. It’s hardly rocket science to consider diversity is it?

  4. I don’t think exams would have made any difference with this one Alan as the exams are not in COMMON SENSE.
    I don’t have level 4 yet, but even I can see the flaw in this one, so I don’t think you can use this for an RDR argument for higher qualifications.

  5. From: Evan [mailto:evan@cerrighedd.com]
    Sent: 24 October 2010 11:12 AM
    To: ‘Hector Sants’; ‘hobanm@parliament.uk’
    Cc: ‘treascom@parliament.uk’
    Subject: “Richard is an appropriately qualified (by advanced examination) pensions specialist”

    From the Lampott site:

    “Richard is an appropriately qualified (by advanced examination) pensions specialist”

    The FSA is insisting that “advanced qualifications” be taken by all advisers in order to “raise standards” and “provide better outcomes for consumers”.

    Mark Hoban likened current adviser qualifications to “the same level as a diploma in shift management offered by McDonald’s”.

    Well Mr Hoban, and Lord Turner, I only have FPC but despite my lowly qualifications I would never have advised this firm to invest even £5 in the Lifemark backed black hole.

    Common sense and experience is more valuable than “advanced qualifications”, the sooner you realise this the better it will be for the nation, if you look at all the brains at HM Treasury, the BofE and the FSA you can see that all those bright sparks failed spot the banking crises, Equitable et al. A trail of “Collective Intellectual Failure” of gigantic proportions and they get bigger each time!!

    Evan Owen

  6. If you care to look at the website of the firm in question you will note that they confirm one of the advisers as having an Honours Degree and the other as ‘highly qualified’ in the pensions arena.

    Their website also promotes the ethcial aspects of their business.

    What does this tell us then?

    You can be highly qualified and still get it wrong. All the letters and credentials in the world mean nothing if you do the wrong thing by your customer.

    The RDR would not have stopped this and, as always, it comes down to adviser morality and not examinations and other strictures.

  7. Alan B

    You assume too much, this IFA is a fee earner according to his website.

    This is the kind of comment which perpetuates the urban myth that there is some ideal ‘model’ of distribution. There isn’t, and the RDR will not work in the way you, or the regulators, might imagine.

  8. Have I missed something here? Where in the article is there any reference whatsoever as to how the IFA was paid? Why the assumption he received a commission as opposed to a fee or retainer for advice to the trustees? And why the assumption that an IFA remunerated by fee would not recommend this product?

  9. New Model Advice gets it wrong 25th October 2010 at 10:26 am

    Excuse me all you holier than thou New Model
    level 10 inte-galatica mega advanced diploma holders, just look where all you qualifications got this company – half of their asset in Lifemark!

    Just go and see how Lampotts promote their high qualifications:

    Richard Lamborn is an appropriately qualified (by advanced examination) pensions specialist

    Andrew Clarke joined the industry in 2000 following the completion of an honours degree, training as an IFA with Towry Law.

    And oh yes a Towry Law background too boot!

  10. Having been at the end of an investment like lifemark the big problem as I see it is not always the advice that is given, but the way some fund managers and companies dress up investments to pass on to the IFA community.

    Yes we can all be good with hindsight and throwing stones really does the industry no good, I think that products need to be cleared with the FSA and risk marked at outset. Thereafter if the risk changes it is the IFAs responsbility. However, some sort of risk marking at the outset might avoid some of the Banana skins that our community keeps slipping on!

  11. @ Tony Marsden – Have you miseed something?

    True or not I don’t know, but clicking through the above link to the Financial Mail article, you find this:

    ” … Lampott earned £60,000 commission-from selling the Keydata investment to Micro’s pension scheme.”

  12. Oh dear, poor Alan B.
    You have just proved what a lot of twaddle the arguments for fees and qualifications are.
    I can’t wait until your next posting.

  13. Allocation allocation allocation.

    Who they got paid is up to the parties involved.

    But the Investment advise even if it had gone right was flawed full stop.

  14. Well then that’s OK – yet another client gets completely useless advice (and yes, into a product that pays high commission) but everyone is happy to say that the status quo is fine and there is no need to improve the basic standard of our profession. It’s time to wake up and accept that this kind of thing is not acceptable and happens far too regularly to be simply dismissed as rogue.

    Alan Lakey – I don’t understand why you polarise the argument to experience -v- qualifications. It is not a question of either, but the need for both together.

    If the long standing IFAs of this world got themeselves qualified and insisted that their younger, less experienced colleagues obtain appropriate qualifcations then over time the whole skill base of the IFA population improves. Anyone that cannot see that is, in my opinion, choosing not to look. In addition ours is the only profession I can think of where one can give fully fledged advice without holding at least a level 5 qualification. In other words the people coming into these other professions have already attained a specific and measurable level of knowledge before they are allowed to begin practicing. Their experience then builds on top of that foundation. What is wrong with this model for our profession?

    Neil Liversidge – how happy you are at this discovery. Sadly I fear that you will use this to reinforce your attitude that all is well in the IFA world.

    I accept that this is not the best example to promote my case but nonetheless the standards of our profession are simply lacking in far too many cases and all I ever hear is about why things should not change. We need to move on and accept that if we want to be regarded as a profession we need acceptable minimum qualification standards and full, clear disclosure on fees and I struggle to understand how anyone can argue to the contrary, unless of course they think that the current reputation of our industry (reinforced by this particular event) is one to be proud of.

  15. As others have indicated, all the qualifations in the world don’t mean you ain’t stupid and greedy, and no qualifications don’t mean you are!

    So we’re all agreed that RDR will achieve…..?

    Very little, would be my expectation. The greedy idiots will still be around, they’ll just be qualified greedy idiots.

    If the advisers really did take, and keep, £60,000 from investing 50% of scheme assets in this one (weird and suspect) product, and if they really are as qualified as they seem to be claiming, what other conclusion is there?

  16. @ Alan B – If youa ctually care to read what many of us are saying. A good proportion of us already work on CAR and many of us are not against level 4 (I was studying for mine and note I say WAS as I may not be staying an adviser the way we are being dictated to by people once again who fail to apply any common sense). Common sense would suggest that the risk of pushing through a level 4 requirement to quickly before enough new entrants are at level 4 and taking in to account an orderly retirement (I am not for long term or even medium term grandfathering), woudl actually INCREASE the liklehood of more cases like thois one where it appears a highly qualified firm has got their asset allcoation completely wrong and failed to even apply a modecum of commons sense for which you don’t even require a GCE O-level in ART to know it looks wrong… In fact you probably only need a cycling proficiency to know that it was an accident waiting to happen.

    I have posted anon as Alan B’s might just as well have been anon as it does not identify who this person with a superiority complex actually is, so he obviously doesn’t wish to stand by his own words.

  17. 10 out of 10 for having the nerve to come back with another comment Mr Alan B, whoever you are, but you really need to go and crawl back under that rock now

  18. “Profession”

    As in Solicitors? High Court claims against that ‘profession’ have doubled over the last two years, PI is nigh on impossible to arrange for that ‘profession’.
    All Lawyers are highly qualified, they have to be.

    Equitable Life was run by actuaries, the exams to become one of those elite persons are among the hardest, but they missed EL and more importantly caused and perpetuated the LAUTRO fiasco.

    I admit that quite a few advisers should brush up on things but when you see the government rearring the pensions system at the stroke of a pen you wonder what value there is an a CII exam based on what applied yesterday.

    Bonkers.

    QUALITY CPD may be the only way forward.

    What qualifications do regulators need? Would exams help them spot the next dead parrot?

  19. Neil F Liversidge 25th October 2010 at 1:42 pm

    @ Alan B – actually my friend I’ve run my firm on CAR since the day I set it up, some 3 years before anyone had ever heard the term used in anything but an automotive capacity. I’m also 20 points away from my diploma which I expect to have next month. My position has always been – and remains – that a cliff-edge imposition of higher qualification requirements is wrong and unfair, and that a free market should not restrict the choice of payment methods available to clients. I also think our lords and masters at the FSA have totally wasted the £1.8bn spent thus far on RDR, a figure ironically 20% higher than Equitable policyholders will be paid in compensation. Now what was Equitable’s USP again? As I recall it was something about not paying commission. It’s an equitable life Alan!

  20. Neil F Liversidge 25th October 2010 at 1:45 pm

    @ Alan B – the other thing which your first comment and my first reply illustrate beautifully, of course, is the value of research!

  21. Could the firm sue the trustees?

    If so I hope they have DandO insurance…

  22. @ Neil Liversidge

    It certainly was a good spot to find the info on their website saying that the firm are predominately fee based, but as per previous comments (and the Financial Mail article) the company chose to remunerate the firm through £60K commission (from the fund) rather than a (presumably more moderate)fee (from the company). If they took 3% on the whole £5.25 million, they would have earned over £150K from this business. Doesn’t this make your research redundant?

    Occupational Pensions aren’t even FSA regulated, so it’s all a moot point!

  23. “Occupational Pensions aren’t even FSA regulated, so it’s all a moot point!”

    Correct but many of the investments in them are so its still a valid point.

    It never ceases to amaze me how the IFA industry argues amongst themselves so much. Its no wonder that the FSA are able to walk all over you.

    I am not an adviser but even I, with my limited investment knowledge, know its not a good idea to put so much of your assets in one investment.

  24. I choose to make my comments annonymously because I know that they are not popular views and I suspect that if I made my identity clear I would receive no end of abuse directly – the playground mentality in action ( a la Annonymous 1:23pm “crawl back under that rock” – very grown up and constructive).

    You can criticise all you like and, if you choose to, much like those that insisted the world was flat and had hundreds of arguments to prove it, you will always find examples to show why poorly qualified advisers are better than higher qualified advisers and why better qualified advisers are crooks. I can find many more examples of a well qualified adviser consistently giving better advice than a less well qualified adviser. The simple inconvenient truth is that in general a better qualified workforce is in general a more professional workforce.

    Neil F Liversidge – I am pleased that you are amongst the enlightened of our kind but I don’t agree that 4 years to achieve a relatively straight forward qualification is a “cliff edge” imposition. I would also repeat the point that in any other profession attainment of a suitable qualification is a pre-requisite to practice.

    I also agree that there should not be an imposition on how fees are earned but unfortunately there are numerous examples of commission levels being shown to be the overriding factor in recommendations to clients. That cannot go on and as we as an industry have, by and large, failed to deal with the issue I fear that we have no-one to blame but ourselves collectively for the FSA seeking to impose their will.

    I also take your point about research – I admit that I did dive in a bit on this!

    Evan Owen – if I take your argument to its logical conclusion then we would let anybody do any job irrespective of how poorly qualified they were – binmen for brain surgery maybe (or even Jonny Nostars from MacDonalds for IFA??)It is a ridiculous argument to suggest that there is no merit in qualifcations and as for quality CPD – if its not being done now, when will it ever be done? CPD is a cop out of doing something that takes a bit of effort.

    Finally, Annonymous at 1:06pm – I don’t have a superiority complex. I simply believe that being better educated and being open and honest about how I earn my income is morally and ethically more sustainable than the current status quo in the industry. If I had a superiority complex I would be focussing on your unique use of grammar and language

  25. @ Alan B.

    It is not a question of polarising, although, in general polarisation is good.

    The point that the majority of posters are making is that you can hammer up a wall full of exam passes and distinctions but if your judgement, your ethics or your commonsense are missing then it matters not a jot.

    Structured and focused CPD has been identified by every chartered body (bar the CII) as the way forward to ensure that existing practitoners keep abreast of changes and fine tune their skillsets.

    Such a move by the FSA would retain 10,000 advisers and prove beneficial for consumers.

    A prat with a diploma on his wall is still a prat.

  26. Why are so many people convinced that the advisers in this instance were well qualified? The website simply states that Richard Lamborn has advanced pensions qualifications. Big whoop – that could mean just G60 or J04 / J05. Hardly makes him qualified to give complex investment advice, does it? Nor does Andrew Clarke’s degree which, for all we know, could have been in something completely irrelevant to the job.

    Personally I’d make level 6 the minimum for complex advice – be that investment related, estate planning or HNW pensions planning (SIPPs, drawdown etc.). Level 3 would probably suffice for basic advice – e.g. ISAs, protection and basic pension funding. There would need to be strict controls in place, though, to ensure that basic level advisers didn’t overstep the mark.

  27. Just for a change we are all busy re arranging the deck chairs on the Titanic! I used to work for a large IFA organisation and every time we asked for feedback for the early stages of RDR and other important matters we got virtually no replies.

    How on earth can we protect our profession (if we are actually a profession?) when IFAs are too busy slagging each other off on the forums of Money Marketing to actually engage with the Regulator?

    If paranoid (?!) lads like Alan L would actually put his views to the right people at FSA on an ongoing basis then we might actually have some influence on future changes.

    Otherwise our enemies (and yes we do have them) will continue to have a field day.

  28. This is a good example, both the case and comments following, of whats wrong.
    Firstly, we need to be able to engage with each other as a community without appearing to pillory someone simply because they hold a different view.
    Secondly, we ought to try and find some basic areas on which we largely agree in order to present a united front. If a large enough body of MPs (however late in the day) are intending to raise this matter, and the TSC has already raised concerns on aspects, then surely it is worth all or part of the IFA community developing compromise solutions that might offer a way out that works better for clients than the current proposition.
    Fwiw I have 2 suggestions into the mix.
    1. To avoid the loss of long standing advisers (detrimental to their clients) you could create a more restricted role (ie avoiding complex advice scenarios) for those who cannot or choose not to obtain higher qualifications. There are plenty of simple areas of advice for many clients that do NOT necessitate higher qualifications, assuming appropriate training, CPD etc.
    2. The capital adequacy solution needs to meet the desired objectives – the current solution doesnt.
    Long stop solutions also needed – suggestions?
    As for adviser charging, there seems to be a lot of negativity about it, but isnt it effectively still commission but just with total transparency and client agreement?… I just cant see what the problem is with it, unless one thinks lack of transparency and client ignorance is better?
    However, it alone still wont stop the few unscrupulous advisers manipulating weak clients, so there should still be some additional safeguards such as caps or reporting. I wonder if in this case the Trustees were aware of the £60,000 earned?
    All these blogs and forums seem to just go round and round though with no real progress being achieved…. so if anyone would genuinely like to try and find a compromise position on which enough of us to carry some weight can be united, then Im happy to initially facilitate (someone has to!) so email me on pharding@cheveningfinancial.com to see if progress can be made.

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