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Tim Sargisson: When Knightsbridge did not mean a quality experience

There is genuine concern some advisers are swerving their responsibilities after giving poor advice, writes Tim Sargisson, but also evidence of firms rising from the ashes of failed advice businesses

My sole motivation for writing this piece is to try and make a modest contribution towards improving how, as advisers, we engage with our customers – and thus improve the customer experience.

At Sandringham, our core focus is to support, guide and enable our advisers to protect and enhance the lives of our clients. This can only be achieved across the industry if, collectively, we understand that better customer outcomes are what should drive us all in the provision of advice, which improves the client’s lot and enhances our shared reputation.

I mention this because, earlier this month, the Sunday Times ran the cautionary tale of two friends whose desire to ensure their pension pots were well managed allegedly cost them a total of £650,000. At the same time, fees of £100,000 were paid over five years to the firm involved – Knightsbridge Financial Management.

The firm’s advice was to invest in a high-risk, unregulated fund called Premier New Earth Solutions, which was suspended in 2014 and collapsed in 2016 leaving investors with diddly-squat. A further investment made by one of the two friends into a Morgan Stanley Bond contrived to lose 74% of its value over five years. Knightsbridge Financial Management has now been liquidated leaving more than £1m in outstanding claims.

The pair’s losses were compounded by the benefits foregone by transferring out of their defined benefit scheme and, in the end, the Financial Services Compensation Scheme (FSCS) refunded them just £50,000 each.

It is bad enough were this to be an isolated case, yet the facts demonstrate it is not. In cases where a financial adviser has gone bust, the FSCS has ruled in favour of 55,515 people. Of these, 6,387 received the maximum of £50,000 – That’s £319m of our money paid to this group alone.

The other startling fact is the total is 25 times the numbers of payments made by the Financial Ombudsman Scheme (FOS). There is legitimate concern that directors might choose to voluntarily liquidate their firm rather than face a potential claim via the FOS, which can award compensation of up to £150,000.

This situation is, however, a double-edged sword. Yes, there is the genuine concern about financial advisers swerving their responsibilities after giving bad or inappropriate advice, but there is also evidence of firms rising from the ashes of failed advice businesses.

The Sunday Times article highlights that, while Knightsbridge Financial Management may be liquidated, the director involved has incorporated Knightsbridge Personal and Corporate, which is now an appointed representative of a national network.

MP and Work & Pensions Committee chairman Frank Field has expressed his concern about this situation and urged the Financial Conduct Authority (FCA) to act like the consumer protection agency it is supposed to be. Likewise, Baroness Altmann has argued those who give bad advice should be struck off, pointing out: “This happens in medical and legal professions and should happen in financial services too.”

‘Moral hazard’

The real issue here is one of ‘moral hazard’ but I believe an answer to the problem is at hand and comes with the arrival of the Senior Managers & Certification Regime, which begins its roll-out this year. The concern of the retail sector has been the dismantling of the FCA register and its impact on consumer protection if consumers are unable to determine for themselves if an adviser has the appropriate permissions to do the job.

Yet firms will ultimately be responsible for who they approve and certify, with the onus falling on firms to ensure individuals giving advice are ‘fit and proper’. Senior managers are responsible and accountable for the business areas they lead and this particular CF3 hopes firms will understand the obligations the Senior Managers regime entails and ensure advisers who give bad advice are unable to find a home.

Tim Sargisson is chief executive at Sandringham Financial Partners. He will be among the great line-up of speakers at Professional Adviser’s inaugural PA360 event in London on 24 April. Find out more here

Published on 20th March 2018

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