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IFA to blow whistle on adviser who churned client

on Nov 09, 2012 at 11:10

IFA to blow whistle on adviser who churned client

An IFA is planning to blow the whistle to the Financial Services Authority (FSA) about a West Sussex-based adviser who cost his client over £200,000 through poor advice.

John Kelly, partner at Shoreham-by-Sea-based Square One Financial Planning, discovered the adviser had churned his client, now in their 60s, through a number of life assurance bonds.

The client’s claim was upheld by the Financial Ombudsman Service this year, and the adviser and insurance companies paid out a total of £217,816.

Kelly said he would blow the whistle because he believed the adviser’s conduct was detrimental to the reputation of the profession. 

‘If our industry is to be seen as a profession, this should have been stopped,’ he said.

‘This [adviser] is the kind of person who puts our profession into disrepute. I will go to the FSA about this.’

From 2004 to 2007 the client was advised to surrender five bonds, incurring early exit penalties, to invest in other bonds that were unsuitable.

An example of this was advice given to surrender a Prudential bond and a Legal & General bond, accruing an exit penalty of around £5,000. The fund switch did not match the client’s risk profile.

The Ombudsman dealt with the matter in the form of five separate claims, so that the total redress amount could be allowed to exceed the per claim limit of £100,000.

43 comments so far. Why not have your say?

PensionMan

Nov 09, 2012 at 11:27

Good for you!

But if you expect the FSA to do anything dont hold your breath!

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Bob Donaldson

Nov 09, 2012 at 11:29

Why is the advisor reporting this surely the Ombudsman recognises outright bad advice and should be blowing the whilstle to the FSA.

It is one thing incorrect advice or poor advice but churning and outright bad advice stares you in the face.

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Green Eyed Monster

Nov 09, 2012 at 11:39

The recorded 'reasons why' , (no doubt approved by the adviser's compliance officer) should make interesting reading!

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Peter Parker

Nov 09, 2012 at 11:39

Get on with it then...... !

Otherwise one could accuse you of being in it for self-publicity and financial gain rather than more "altruistic" reasons !!

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Philip Wise

Nov 09, 2012 at 11:45

I wonder if reporting the conduct to the adviser's professional body might be more effective - loss of SPS might be the outcome.

On second thoughts, I better check it wasnt me...

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Bluetooth

Nov 09, 2012 at 11:48

well said Peter Parker. Sounds like a cocktail of 'pompous prat on pedestal' (nice alliteration) and bad advice between the two of them

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Thomas Kelly

Nov 09, 2012 at 11:49

but was he level 4 qualified, I mean that is what will stop this sort of behaviour isn't?

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Paul R

Nov 09, 2012 at 11:50

Well done, John. I believe that bad practice should be exposed and protect the reputation of IFA's who strive to be honest individuals. Even though we don't know the facts of the case, RDR is coming in to protect the client more and expose the bad apples in our industry

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TA

Nov 09, 2012 at 11:53

Good work John. Send this thief's details to his professional body as well so that he will be barred from practising in the future.

These are the kind of people who should be banned from working in this profession. They have no fear of taking advantage out of the vulnerable. For that, we all have a duty to report these kind of thieves.

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Tony Clarkin

Nov 09, 2012 at 12:06

Why is it that the financial ombudsman and the FSCS work in camera?

If this had been a pension ombudsman's determination it would have been made available for public scrutiny;

http://www.pensions-ombudsman.org.uk/Decisions/Search/Index.aspx

In an ideal world every ombudsman's determination should be published

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Mike WOI

Nov 09, 2012 at 12:07

mmmmm rat turned rat catcher springs to mind, once again we are not aware of the clients circumstances at the time or any of the reasons behind encashing the bonds and then re-investing within the same type of contract

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Philip H

Nov 09, 2012 at 12:14

TA - I don't think there will be many people in their 60s who would be happy to hear they are in the vulnerable client category.

Peter Parker - very true, though if one of these "advisers" reads this and it makes them think twice something positive has been achieved. Good can come as a by product of self promotion - just think celebrity and charity.

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Looking Forward

Nov 09, 2012 at 12:21

Not sure if I follow this story to its fullest extent, was John taking trail on these bonds and was he not servicing the client on a regular basis. Did he not question the change of authority with the client.

Good on him for blowing the whistle, but was he doing his job proprely???

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Student Banking

Nov 09, 2012 at 12:21

I have two questions. Firstly, was the said adviser independent or a tied adviser? Secondly, is the said adviser who recommended the transactions still working in the industry?

It is all very well and good reporting the situation that has occurred in the past - but why was it not stopped beforehand? Lots of questions need to be answered by the Compliance Office of the firm concerned but what lessons will they have learned and how can they stop it in the future. The actions of one individual will always leave marks on the many who are innocent and follow good practice.

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Ian Coley

Nov 09, 2012 at 12:24

This should be the norm not the news qute frankly.

Anyone who thinks this is" grassing up a mate", really needs to consider a different career

Ian Coley

Partner

Medical Investment Services

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david 1

Nov 09, 2012 at 12:25

I Agree with Peter, I do lots of this stuff, usualy including banks sometimes IFA's, but dont go to the press with it! get on with it, its never going to end, RDR will not stop hungry salespeople who can pass exams.

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BJW

Nov 09, 2012 at 12:40

Great way of lead cheap lead generation........Why didn’t I think of this!!!!

One feels the advisers compliance team have a lot to answer for

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Smudger 2

Nov 09, 2012 at 12:42

On the way to work I picked up some litter that wasn't mine and helped an old lady up the staircase with her bags..

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Hickky

Nov 09, 2012 at 12:57

Last night I came across a 2008 offshore bond, with 7% initial plus 0.5% annual that had an 8 year surrender penalty, sold by a local IFA. As this had regular withdrawals, offshore or onshore for a basic rate cautious taxpayer? I suspect the decision had more to do with his income.

Within 2 years he recommended that 10k was surrendered and invested in a biofuel investment now being investigated by the SFO.

He is still trading, and has sold biofuel to a number of his clients.

The client will instigate the complaints procedure, going forward, but it only proves there ought to be no hiding place for greedy/stupid/unethical advisers, but sadly, exams and adviser charging will not eliminate them.

But RDR is supposed to be implimented for customer protection! Not a chance.

Where the money in the bond was invested was OK and we all think we could have done better, but this is no reason to complain. However the highest initial, then churning, then unauthorised investment into a now bust UCIS shows a pattern of behaviours I find disturbing. Mind you, all clients think he is a nice guy. Why is there no procedure for reporting those who do not maintain the highest of ethical standards? Or is there?

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Mitul Patel

Nov 09, 2012 at 13:00

i bet you he is cheating on his wife right now

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Philip Wise

Nov 09, 2012 at 13:00

After all that hassle, the FOS has just taken the client back to Square One.

Sorry, but it is Friday.

Do I get a royalty for the marketing slogan?

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Brian Johnson

Nov 09, 2012 at 13:00

sanctamonious, publicity seaking pratt. Reminds me of a guy who reported another IFA 2 years ago to the FSA and then after they refused to ban the so called rogue adviser, the reporting IFA wrote to the FSA demanding the other guy be struck off. Why do some people in this industry revel so much in the persecution of others. If you want to do the regulators job, then go and work for them!

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madmitch

Nov 09, 2012 at 13:21

I thought bonds had to be changed every 3 years to maintain income.

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Phil Castle

Nov 09, 2012 at 13:22

Phil Wise beat me to it with his comments. This is what an SPS is supposed to be for, i.e. this isn't actually supposed to be an issue for the FSA under the new regime, it should be for the Professional Body to decide whether to continue to issue an SPS or whetehr remdial action is requried first. If they decline to issue, it does not become a problem for the FSA unless or until all professional Bodies decline to give the firm an SPS. Then it may become a restriction of trade.

Membership of a professional body coudl nto be made mandatory by the FSA for individuals to get their SPSs, but most Prof bodies will not issue an SPS unless you sign up to THEIR code of ethics and submit to theri discipline.

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Green Eyed Monster

Nov 09, 2012 at 13:25

Brian,

One of the reasons could be that we pick up the tab for the compo involved, so whistleblowing is a legitimate risk mitigation exericse.

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At last!

Nov 09, 2012 at 13:25

I agree entirely with Brian Johnson - what a publicity seeking, sanctamonious idiot.

Get on and whistle blow - but do it discreetly and without going to the press about it.

PS: I have whistle blown before - rest assured, the FSA will do absoutely nothing.

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DAVID MORRISON

Nov 09, 2012 at 13:51

And you wonder why the IFA industry can never be unified and will probably never be taken seriously as a profession?.

Too many individuals who require their ego`s to be rubbed and I`m afraid we have another one to add to that very long list.

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Jonathan Kirby

Nov 09, 2012 at 13:53

Surely this is not whistle blowing. That is usually done by an employee in a government department or large corporation.

The other point is that whistle blowers tend to keep their identity secret for fear of reprisals.

One does suspect the motive here even if the cause was just.

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Mike WOI

Nov 09, 2012 at 14:20

Shabba

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Stratfield

Nov 09, 2012 at 14:29

Hold on a minute here, what does "cost the client over £200000" actually mean?Was a re-basing exercise going on? Did the FOS say it was churning or is that just the vocabulary used by John Kelly and/or NMA? What was the actual wording of the claim? All that this article says is (as an example) "The fund switch did not match the client’s risk profile. "

We do not know from this article just what the nature of the unsuitablity is regarding the bigger picture.

Maybe John Kelly would like to come on here and state for the record his reasons for his intended action rather than the readers of this magnificent organ relying on their imagination?

And maybe NMA would like to be a bit more precise rather than chuck out another piece of end of the week "daily hate" style journalism

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whistleblower

Nov 09, 2012 at 14:43

Did someone call???

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Graeme Ferguson

Nov 09, 2012 at 14:48

Friday and a slow day at the office for this article to appear! Sadly yes there are some real sad advisers out there but we are no different to any other industry whether it is a doctor or car mechanic!

RDR and Level 4 or Level 6 will never stop this...there are just some poor advisers out there! Their internal compliance teams should be sorting this out!

However sad this case is and I am glad the client has been compensated, however did the client not know, did they not see the cash in value, did they not see the penalty, did they not see the adviser charge, did they never get an illustration, did they never get a report, did they never wonder why they were moving products every minute.... and is the current trend...they may be deemed a sophisticated investor with that much money.....

Anyway I rant, at this slightly self asorbed pat on the back I am wonderful article!

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Lyndon Edwards

Nov 09, 2012 at 15:17

Reminds me of the palmy days of Fimbra regs when the more energetic and/or creative amongst us c/would rebroke a client's personal pension every 2 years once the client was out of the capital units and earnings period. I've met more than one confused client with several useless pension contracts all cap units and no acc funds.

I have been told by a FOS case-worker that names are passed to the FSA, and they do keep in contact. I would imagine that this could lead to closer FSA scrutiny of the sinning adviser's firm.

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phil via mobile

Nov 09, 2012 at 15:47

Is anyone surprised by this. Bad eggs in every profession. Looked Like the system has worked and the client compensated. Is it newsworthy?

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TA

Nov 09, 2012 at 16:53

@Philip H - anyone who isn't more knowledgeable than their financial adviser is vulnerable.

@ the bickering rest - not surprised by the morons having a go at this guy and that he might be seeking publicity. So what if he is? If you've got nothing constructive to say then don't bother.

But here's something constructive I can say...

Most of the morons in this profession who have a strong opinion about these things and are not scared to voice it lack advanced education. Might have been lucky to pass A-levels, then ended up flogging policies. So no wonder that whenever someone says anything about themselves, jealousy or alpha rivalry takes over.

You don't get this amongst secure people. Only the insecure.

Thank god most of these idiots will be kicked out from next year.

In the meantime, go and pass some exams and overcome your insecurities.

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Graeme Ferguson

Nov 09, 2012 at 17:14

TA, must have been a tough day as the only person that comes out looking sad is you with these types of comments

And I will say this again...people really should use their own real full names when commenting.

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Anitaki

Nov 09, 2012 at 17:16

Ian Coley is spot on with his comment

Unfortunately, this should be normal practice but it might need publicity to get the FSA etc to act on the whistleblowing.

Usually whistleblowing results in deathly silence and "lost" correspondence in CanaryLand (Should be re-named CuckooLand)

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Aristotle

Nov 09, 2012 at 17:50

Exactly, the reason this adviser needs to go public with this is that it would otherwise get ignored. The sooner, these charlatans are exposed and kicked out of the industry, the better for the whole profession.

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Mark Jeffries

Nov 09, 2012 at 23:04

Fairly standard behaviour I'd say. The industry would be decimated if all the advisers indulging in this kind of behaviour were kicked out; churning after 5 years, or if they're really bold, beforehand and hang the exit penalty ("whatever you say dear, you know best").

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Mr Ed28

Nov 10, 2012 at 16:37

Oh yes, 'its outside the earnings period'. I.e. now it can be churned......amazing how the BDM's from the life offices actively help the chuners to do this. As the BDM is paid on money brought in then he does not care, the adviser wants the commission and everyone is happy, Well, apart from the life office which makes no profit out of that bond. And of course the client. But who cares about them.

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TA

Nov 10, 2012 at 17:59

@Graeme Ferguson - just tell us how exactly I come across sad?

Can't accept the truth can you?

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Graeme Ferguson

Nov 12, 2012 at 14:33

@ TA... you said "Most of the morons in this profession who have a strong opinion about these things and are not scared to voice it lack advanced education."

You also said other things, which only made you look like the person with insecurities... i.e. you need to pass an exam to make you important enough to voice a concern????

Not to say that I don't have enough qualifications or that I couldn't do with more, however a fleeting statement like this is just so inaccurate.

RDR and its increase in qualifications will not stop an individual who is hell bent on behaving dishonestly for his/her own gain.... to think otherwise is foolish as is to think that all really educated people have the best opinions!!

There sadly was no truth in these statements unfortunately

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TA

Nov 12, 2012 at 19:33

@Graeme Ferguson

Now then Graeme. I've got better things to do than get into a personal duel with you. You have said that what I say makes me look insecure! Your IE seems to be an interpretation, the conclusion of which is quite humorous.

But you are right about qualifications not making one ethical. Crooks will always be crooks. It just happens to be that most of the people with poor understanding of products and its technicality became floggers reliant on commission. They also gave “free advice” which has now resulted in the majority of consumers expecting advice to be free.

You see, the point of all of this is that people should not have a go at someone for whistle blowing. How do you know that the magazine didn’t just call him and ask him how his month had been and whether he was up to anything out of the norm? Which is why I say to these opinionated sods, if you got nowt constructive to say, do something else.

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