The financial press has been carrying a number of stories where the regulated adviser believed that all they had done was follow client’s instruction, but after a complaint the Financial Ombudsman Service disagreed and awarded compensation. An example is here.
Typically, these have been situations where the client has invested in unregulated collective investment schemes, (UCIS), like carbon credits, green energy, palm oil plantations, un-built tourist hotels, car parking places or whatever other snake oil was being pedaled at the time. The regulated adviser claims that they advised on the Self Invested Personal Pension scheme, (SIPP), that was used to release pension money that then went into the unregulated investment.
The Ombudsman has ruled that you cannot advise on a SIPP without taking into account the investment utilised, which has a number of consequences. For the client, this is something of a windfall, as normally with unregulated investments, the investment would be lost, (the clue being in the name!). For advisers in general, this is a disaster as all advisers contribute to a levy for the payment of compensation when the FOS say it is due, irrespective of the advice being good, bad or indifferent.
Another type of inadvertent regulated advice is where the adviser’s reports are unclear where advice was or was not given; the Ombudsman will tend to side with the client where there is an element of doubt.
“Execution only” should be a very rare occurrence in any case, it assumes that the client tells the adviser how much is to be invested, which provider is to be used and which funds are to be purchased, which is a very unlikely. The only scenario I can see is where the client is wanting to top-up an existing investment and a better alternative does not exist. As advisers we will not do “Execution only”, as we offer a full advice service and deviating from our model is a risk for us.
Although “execution only” does not exist for us, there are other businesses and individuals who offer products for purchase on terms that feel like “you pays your money and takes your choice” *. Clients and potential clients should be wary of anyone who tries to distance themselves from giving regulated advice. Retail financial advice in the UK is a regulated activity, so there is a possibility of heavy fines or imprisonment for selling collective investment products without being registered.
If anyone offering investment products describes themselves as an introducer, marketing agent, or offers “sure-fire” investment certainties in the pub or golf course, and says they are not offering advice, then you have no investment protection. If the product is off-shore or unregulated, then put down your pen, hide your chequebook and run, not walk away!
As UK regulated financial advisers, we can think of very few possible scenarios where an investor needs to use any unregulated product. We will not use them, promote them or introduce our clients to providers of these products.
If you would like to know more about how we can help you plan and realise your financial goals then contact us at firstname.lastname@example.org or call us on 01223 792 196.
The information contained is for guidance only and does not constitute financial advice. It is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly no responsibility can be assumed by Martin-Redman Partners its officers or employees, for any loss in connection with the content hereof and any such action or inaction