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Adviser Workshop: How to blow the whistle on wrongdoers

by Michelle Abrego on Nov 12, 2012 at 13:22

Adviser Workshop: How to blow the whistle on wrongdoers

James Marchant (pictured), Phil Billingham and Andrew Peters describe their experience of reporting cases of misadvice and fraud to authorities.

James Marchant

Director, Sovereign Independent Financial Advisers

In June I was referred a client by an accountant who was very concerned about the advice his client had been given on pension transfers.

The advice was to move a fairly modest pension pot with a guaranteed annuity rate into a very expensive Sipp and then invest 100% of the portfolio into unregulated collective investments schemes. Upon reviewing this, so many alarm bells went off. I met the client and warned him not to transfer. Fortunately, he took my advice.

But I thought the advice firm that had advised him, which was a UK regulated firm, was wrong. I contacted the Financial Services Authority (FSA) via its email address for whistle-blowers, whistle@fsa.gov.uk, and provided the information. The regulator acknowledged my email within three or four days. Then someone rang me and said they might want to talk to me about this. They called and asked me a few questions, which encouraged me that they were interested.

Poor advice

The firm in question was directly authorised but was running a non-regulated firm alongside it. The main company seemed like it was reviewing the pension, while the unregulated arm was giving the investment advice. Although there were two companies, the advisers had their feet in both camps.

It wasn’t just the unregulated firm situation: the advice given was contrary to all the FSA guidelines on pension transfers, and the client had been advised without any concern for costs to invest in a Spanish property scheme. It was going to cost 6% to transfer. The client was not a sophisticated investor: he was a tradesman with £40,000 invested.

[Given a chance to blow the whistle], I would do it again. As advisers, we should all be reporting this sort of stuff to the FSA because when it all goes wrong, we will be paying for it through the Financial Services Compensation Scheme. It’s in all our interests to work together on these things to, hopefully, drum some of these cowboys out of the industry.

Phil Billingham

Operations director, Perceptive Planning

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11 comments so far. Why not have your say?

Arthur Schopenhauer

Nov 12, 2012 at 14:18

Phil talk to your old client who used to work with HG they need help in reporting an unusual profit made by a fund adviser (FRICS) and the funds solicitor while the funds he managed lost £7m

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Nov 12, 2012 at 14:28

You were lucky to get a response so soon.

I got a letter after 4 weeks saying that the evidence l sent in "was being (after 4 weeks ) forwarded to the appropriate department".

Never heard any more.

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Phil Bill

Nov 12, 2012 at 14:35

Arthur, sorry, but much too cryptic for my tired old brain to cope with - can you email me?


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Usually found sitting on the fence

Nov 12, 2012 at 14:36

Just a general question... Is it right that someone who is virtually dying should buy an annuity?

Don't get me wrong, I don't know the answer, but depending on where the source of money came from or the age and amount, are there not some questions to be raised about the original annuity purchase?

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Arthur Schopenhauer

Nov 12, 2012 at 14:46

Hi Phil will get my friend to contact you

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Michael Brown

Nov 12, 2012 at 14:47

And we have come across a well known SIPP provider doing this:

Consolidating 3 peoples pensions into a group SIPP. Releasing £80k of the funds to the company by valuing the Web Site at £100k! Three months later the RWL appeared. There was no mention for reclaiming VAT that had charged. The plan had been set up as a lease back @ some £2500 per month.

The initial charge for the advice. Now wait for it ..... £20,000 yes £20K. No wonder the FSA are looking at SIPPS!

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Michael Brown

Nov 12, 2012 at 14:52

Usually found sitting on the fence.

If the person has reached the normal retirement age of the policy. By this I mean PP and not drawdown dates. Then the following applies: if say the client is 65 the plan due date is 65 then the policy should be paid out via an annuity.

Unfortunately dying is no reason not to buy an annuity. If you don't do this this HMRC can claim their share of the funds as thus is a tax evasion point.

I know it is looks wrong but HMRC will look on it as not taking a benefit so that it is not liable to taxit would be due and the funds pass down the family chain.

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Nov 12, 2012 at 14:56

@ Usually etc

I have come across old plans where there is no return of fund on death. Others that are "return of contributions" (only) on death

Few of these still exist, but they were common 20+ years ago.

On the other hand, plans with 9%+ GARs were also common 20+ years ago, but most seem to have been "Consolidated" into something else that gave 117% unit allocation etc. The conmen have just moved on to a different roundabout, that is all, probably having become Level 4 qualified.

How little some people understand.....................

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Nov 12, 2012 at 14:59

.........................and many of them work for the FSA

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Phil Bill

Nov 12, 2012 at 15:07

Whilst this is off the point, can I just say last week I saw a trustee transfer into a S32 made in 2010 where the fund was £80 000, and the return of contribution on death was £1 300!! So it is still happening!!

And yes, when the client twigged, it got moved!

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Julian Stevens

Nov 12, 2012 at 15:10

To whom can we blow the whistle on the FSA ripping off the financial services industry via the FCA to fill the £107m hole in its Final Salary pension scheme?

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