FCA warns against FAs pushing risky SIPPS assets

Published:  21 Jul at 6 PM
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A recent warning from the UK’s Financial Conduct Agency concerns financial advisors who transfer clients’ occupational pension funds to SIPPS containing risky assets.

In a recent article, CEO of the Financial Services Compensation Scheme (FSCS) Mark Neale noted the considerable increase in wrongful advice claims against FAs over the past year. He added that the FSCS strongly supports the FCA’s action in attempting to deal with the issue.

According to the FCA, advisors are still operating business models which restrict information about assets contained within SIPPS wrappers. The authority states that many client complaints rest on a lack of knowledge about conventional investment practice, and complete ignorance about the possibly risky nature of contents of SIPPS wrappers.

Non-standard, unregulated propositions were not explained in detail to clients, and a number of firms had inadequate professional indemnity insurance and misinformed insurers about their business models. Total compensation of £243 million was awarded during 2013-14 to UK-domiciled clients by the FSCS, with 83 per cent of claims upheld.

However, FSCS assistance and FCA action is limited to registered firms and to clients living in the UK. British retirees and working expats living overseas invariably have no protection against rogue FAs claiming registration and qualification in the home country, all of whom push high-risk, high-charge, unregulated and often illegal offshore products.

The number of expats collecting on their occupation pensions and the amounts receivable due to the deregulation of annuities will be seen as a windfall for commission-hungry salesmen working in retirement havens. Overseas expats approached by FAs should check claims of personal and company registration as well as given qualifications.

Recent crackdowns in Asian jurisdictions have sent illegally working FAS rushing back to the UK and attempting to continue their activities via websites offering QROPS and SIPPS products. In general, these UK businesses are not registered with the FCA, and claiming that only those in overseas locations can be advised may provide a gap in the law preventing claims should investments collapse.
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