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IFA fights for client compensation after network collapse

by Rachael Revesz on Nov 16, 2012 at 11:26

IFA fights for client compensation after network collapse

An adviser is fighting for compensation on behalf of a client who was misadvised by an IFA whose bad practice forced a network into liquidation.

Jill Thomas, managing director of Sheffield-based Future Life Wealth Management, said the £97,200 owed to her client would fall on the Financial Services Compensation Scheme after the previous IFA’s network had collapsed due to the claim.

‘My client has not received a penny,’ she said. ‘It will be going to the FSCS [Financial Services Compensation Scheme] levy.’

Thomas’s client had previously been advised by IFA Simon Hulme, currently with Sheffield-based Futures Assured.

Hulme was previously the sole adviser at Nottinghamshire-based Pridemark Financial Services, which was an appointed representative of Derbyshire-based network Unleash Advice Partnership.

In October 2011 the Financial Ombudsman Service (FOS) upheld the complaint against Hulme citing ‘unnecessary churning of policies’.

The client, who did not wish to be named, was advised to pay a total of £10,000 a month into three personal pension plans with Aviva, Scottish Equitable and Scottish Life, to mitigate corporate tax.

The FOS ruled: ‘No evidence was provided to explain why it was necessary to recommend the personal pensions rather than a stakeholder pension and I noted that the investment was to be made into the standard managed funds offered by each provider.’

‘The format of the contributions recommended by Mr Hulme was designed to generate the maximum commission for Pridemark Financial Services, not to provide the best advice to you.

‘The advice given by Hulme was both misleading and unsuitable.’

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16 comments so far. Why not have your say?

Mike WOI

Nov 16, 2012 at 11:55

is there no news out there other than people blowing their own trumpet

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Gillian Cardy

Nov 16, 2012 at 12:06

Why is the PI policy not paying out?

Was the complaint properly notified?

If the client has really lost this sum then the claim falling in FSCS limits instead of FOS / PI limits will only go half way towards putting things right.

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Greg M

Nov 16, 2012 at 12:12

Gillian, don't ask sensible questions! This isn't a news story, it's just a redrafting of a someone's self-promoting press release.

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Nov 16, 2012 at 12:21

Oh Come On NMA get a grip chaps

Lets slap each other down and down and down - also bring in the FSCS again as a bill

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Smudger 2

Nov 16, 2012 at 12:22

Agree with Greg M and also would like to know how is this wonderful person is being remunerated for all this altruistic work.

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Charles Rickards

Nov 16, 2012 at 12:27

Nice to have the full facts on which to base a judgement, not! Obviously a slow news day. Makes a change to see bond to pension rather than the old style habitual bond to bond after exit penalties cease. Is the point raised here that the misadvice was the surrender of a bond into a pension or the fact a Stakeholder wasn't used? Was the Stakeholder the lowest cost and best option? I could go on, but I've said enough!

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Julian Stevens

Nov 16, 2012 at 12:30

If contributions were paid into PP's with Aviva, AEGON and Scottish Life, then why is the client owed £97,200?

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Gary L

Nov 16, 2012 at 12:48

Are you all trying to give a second opinion on the FOS judgement, or just slagging off the adviser who is trying to get compensation for their client? It sounds fairly clear-cut that the advice given was a commission generation exercise. If the new adviser is trying to put things right then why shouldn't they be paid for it? How would YOU deal with a client of yours who came to you in the same position?

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Julian Stevens

Nov 16, 2012 at 12:57

RU64? Do you, Mr Client, want a plan that:-

1. affords no option for the costs of our services to be built into the costs of the product itself, thereby necessitating us charging you fees for everything we do (albeit we can bill your company, if that's where the contributions will be paid from, instead of you personally)?

2. affords access only to a limited range of investment funds (mostly pretty poor ones at that)?

3. on which I guarantee that the administration will be so poor that I'll have to spend even more chargeable time every year to ensure the plan is running as we'd both wish? And

4. the yearly statements for which will be so basic as to be of virtually no practical value?

That having said, if those questions weren't asked and the three plans recommended were obviously selected with maximum commission in mind, then best advice appears not to have been given. Commission bias may be nothing like as prevalent these days as it has been in the past, but it still happens here and there and adviser charging may well eradicate it altogether.

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Charles Rickards

Nov 16, 2012 at 13:05

Gary, I agree with you with regards to what I would do for a client in a similar situation. However, in true NMA style they give a partial story to generate responses and speculation.

I would just like it if NMA could report the full facts, rather than leave the reader speculating over the real picture.

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Smudger 2

Nov 16, 2012 at 13:15

Dear Gary L. I and many IFAs have been through this process,seeking redress and assisting clients with other difficult areas but like most of the commentators on this site I don't go to the press and make a song and dance about it. It's tiresome, it's self agrandisement and it's not newsworthy. That's why it generates the response. Pompous self congratulation is not worth reporting and if it is then we would like the whole story.

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Sam Caunt

Nov 16, 2012 at 14:06

PII will not pay out because of the insolvency or bankruptcy of the insured.

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Gary L

Nov 16, 2012 at 14:26

OK Smudger, fair point although the quotes could not really be classed as pompous. The story is of interest to me because the IFA is still advising, it makes you wonder how much your PI costs when you have something like this on your CV.

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Julian Stevens

Nov 16, 2012 at 14:32

I'll never understand PII or the multitude of circumstances in which insurers seem to be able to excuse themselves from paying out on a claim.

Logic suggests that anything you may have done whilst you were paying premiums for PII cover should be covered however much later it comes to light that something about that piece of advice turns out to have been defective.

But, if you retire or go out of business or change insurer, your first insurer will only provide that security if you pay them EXTRA, over and above what you were paying them for cover at the time the advice was given and (if you've just changed insurers) over and above what you're paying your new insurer.

So, what with the FSA's pernicious denial of any longstop against stale complaints, your PI insurers have got you by the chunky bits for ever and a day.

BTW ~ it would be interesting to know Martin Wheatley's view on the issue of the longstop.

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Nov 16, 2012 at 17:33

Look for a phoenix

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John Brady

Nov 16, 2012 at 18:15

Well it is at least another exercise that showsthat IFA's do lots of "Unseen" work on behalf of their clients.

Having just read an article by Merryn Somerset Webb in the 16th Novemeber edition of MoneyWeek the IFA will I believe become a thing of the past.

The lengths that certain people are going to to drive us out of business is scary, it's biased and it's uninformed and the worst thing is everybody's opinion is more valid than ours, everyone's opinion gets listened to more than ours and everyone else has someone fighting their corner for them when they are attacked.................everyone except us of course.

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