Who’s afraid of the big bad wolf? It is a nursery rhyme I grew up with that recently struck me as rather ironic given the current state of UK financial services regulations. Let me explain.
Like many other small IFAs across the UK I have seen a huge increase in the last 12 months in the number of people calling me worried about ‘advice’ they have received to move their pension from its current provider, normally to a self invested pension of sorts. It normally starts with a telesales call. ‘Can I speak to Mr Smith about his pension scheme’. Once they are talking to Mr Smith it goes something like this: ‘We are ABC and we have been appointed by the Government to do a free review of your pension funds. You may have seen our adverts – The Money Advice Service or Ask Mas?’
Other telesales lines are similar; ‘It’s about your final salary pension scheme. Did you know that if you died your spouse gets nothing?’ Or ‘did you know that your pension fund is performing badly? and there are better alternatives out there. We can sort this out for free’
Our small practice has received four such enquiries in the last month. Luckily those clients had the sense to ask their employers or scheme trustee at work who directed them to us. We managed to track all the companies who made the initial telephone call. They are all marketeers. But never fear. In the smallest font possible on their website at the bottom it says ‘we are not regulated by the UK authorities and we do not give financial advice’.
When I challenged them on giving advice the reply I received was ‘we don’t’. I explained my clients thought differently, and that I will have to report them to the FCA. Just wait until they get their teeth into this one I thought.
As it turns out, the FCA is not a big bad wolf but more of toothless gummy bear. I tried the MAS to get them to take action, but to no avail.
These four clients are the lucky ones. Two clients I dealt with a month ago both had been ‘advised’ to move from a final salary scheme into a Sipp. The firm is now in default and both my clients went to the administrators meeting with my encouragement. They were both incensed to hear the old directors explain they were moving on to their new roles – as directors. We are now awaiting redress from the Financial Servies Compensation Scheme, and I await the bill I will inevitably have to pay as a result for something I never did.
The FCA are meant to protect the public and on this issue they are failing badly.
Often we find via Companies House that the marketing companies and introducers of varying degrees are all the same directors and operating from the same addresses. Every step takes between 1 per cent and 3 per fees plus ongoing annual fees.
And all this is couched as free advice.
Meanwhile I sit in my office writing a drawdown report. I am on page 47 of technical waffle, and all because I am giving the client what they asked for in the first place . And yet the merry-go-round of regulators and marketeers goes on, all paid for by my small practice and my clients.
Greg Heath is managing director at Derbyshire Booth