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Adviser Workshop: How to blow the whistle on wrongdoers

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,, 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

The future regulator, the Financial Conduct Authority (FCA), has said it wants more market intelligence. That includes simply voicing concerns: there’s a whole spectrum, so it’s not all as dramatic as whistleblowing.

The current process of talking to the FSA as an IFA is not made easy. The assumption on the website is that you are blowing the whistle as a junior employee in an organisation. The FSA doesn’t contact you or come back to you. When you ring the helpline they don’t really know who to put you through to, so there is no internal process at all at the moment.

When I persevered and put my concerns to the regulator in writing, it took over two weeks to even acknowledge the email and it was just a standard response.

Immediate threat to consumers

My complaint was about a firm that was directly contacting elderly investors to invest in what was effectively a boiler-room scam. A lot of money could have been taken in two weeks.

It was the second time I’d gone to the FSA, but this time I pushed harder because I felt consumers were under immediate threat.

The fact that the FSA has been so incompetent and misguided in its process will not stop me. If I come across anything else that needs to be reported, I will report it. If we react with the same careless approach to consumer protection as the FSA has, that will cause a problem for consumers.

I think the FCA is looking for involvement from professional and trade bodies much earlier in the process. Trade and professional body members need to feed their concerns to the organisations they belong to, and those can be fed to the FCA. This way advisers who are concerned, but don’t want to raise their head above the parapet to the FCA can still get their concerns heard.

Andrew Peters

Director, Deep Blue Financial

I have a very strong culture within my firm where anything the staff are concerned about, they will immediately bring it up. It’s a good practice, regardless of who you’re blowing the whistle on or how tiny the concern is: it could even be internal.

Possible fraud case

While I have not blown the whistle to the FSA, I have to the Serious Fraud Office (SFO).

A woman came in and said her brother had bought an annuity through us. She said her brother had moved to Wales and stopped his bank account, and the annuity provider was not paying out. She said she had spoken to the insurance company, but it would not make the payments to her because she didn’t have power of attorney.

It seemed pretty straightforward but, as we looked more into it, we found out her brother was virtually dying when the annuity was bought four years before. Questioning whether he was still alive, we phoned her up and tried to get in touch with the brother. She dodged our calls and we didn’t get a response for over a week. This raised questions.

We went to our support services provider Paradigm and it suggested we should report it to the SFO. We went through the details with the SFO and it took the case from there. I haven’t heard anything back and I won’t because that’s the nature of these things.

However, this situation came about from having a culture in the office of questioning things and thinking ‘this smells funny’.

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