Warning over rogue advisers preying on ‘oblivious consumers’
Dobson & Hodge financial services director Paul Stocks has warned that more needs to be done to educate consumers about what regulated advice means and how it fits into the bigger picture.
The Financial Conduct Authority (FCA) clamps down on disclosure procedures in regulated firms, he said, yet it fails to steer consumers towards asking the right questions when dealing with unregulated advisers.
Stocks said: “The issue in our profession is everyone can stand up and say they are a financial adviser.
“If the clients don’t know what they are walking into and what questions to ask then that’s how at the end the outcome can be that they don’t get what they expected or they are in something that’s not appropriate. And there is no comeback because the product or investment isn’t regulated and falls outside of the compensation scheme.”
Consumers often cannot identify unregulated advice as they walk into it “with their eyes completely closed to the situation” and the Retail Distribution Review (RDR) might have made the problem worse as there are “more unregulated people around now”, he suggested.
Stocks said: “I bet if I met ten clients I could go through every meeting without giving them a business card or our client agreement, without the client blinking because they will be oblivious to that obligation.
“I could quite comfortably convince them that some weird and wonderful investment somewhere would give them exactly what they want in ten years’ time. And then I get paid commission for doing it.”
His comments came after the Financial Conduct Authority (FCA) signalled renewed interest in pension liberation and schemes such as self-invested personal pensions (SIPP), which can act as vehicles to investment mis-selling, albeit unwittingly.
His clients, and indeed Stocks himself, have been increasingly contacted by schemes, trying to convince them to liberate their pensions or invest in esoteric products.
Personal Finance Society chief executive Keith Richards agrees there is a lack of consumer awareness around the value of qualified advice.
However, he doubts it’s the regulator’s job to educate people. The regulator should play a part but it’s not meant to be their sole purpose, he suggested.
“I’m not convinced it is the regulator’s job to [educate the public]. Most of that responsibility actually sits with the industry and as one of the main professional bodies in the sector we are certainly taking on that mantel. We are working with the likes of the Money Advice Service and some other organisations to start to understand how we can better promote financial services within the public space.”
Earlier this year fellow IFA Kim Barrett hit out at the regulator for failing to ensure consumers better understood the changes RDR has brought to the industry.
He said: “The FCA is making the industry comply, rightly so, but it’s not bringing the public with it. So you are getting a lot of changes to the industry and the way things work without the public having a clue what’s going on.
“The FCA should be out there banging the drum to make people understand what the different qualifications meant.”