Financial advisers should be given “restaurant style” ratings to make it easier for members of the public to compare businesses. The recommendation from one of Wales’s leading firms of independent financial advisers comes in the wake of the scandal over the poor advice given to some British Steel pensioners.
Will Harris of Cwmbran based Lawrence Miller & Co, says there needs to be an overhaul lead by the Financial Conduct Authority (FCA) which polices the sector.
He also wants the FCA to compensate those pensioners affected and for the rogue “advisers” to be prosecuted.
Will Harris was recently invited to write for the prestigious, and independently published, Parliamentary Review*. He used his article, in the edition just published, to highlight his concerns and has worked with local MPs, including Nick Smith, who represents the former steel making constituency of Blaenau Gwent, in trying to bring the problem to the attention of the FCA.
“Good financial advice is mostly about peace of mind and not the accumulation of wealth,” said Will Harris. “They are, in fact, two very different things, as a large number of ex-British Steel workers so tragically found out when they were coerced into transferring out of their company scheme,” he added.
Will Harris was so concerned at the time that he decided Lawrence Miller & Co wouldn’t get involved in advising any of the former employees about what they should do with their pension pots.
“It was all too easy for some “advisers” to operate under the regulatory radar. While, ironically, a minority of the pensioners did the right thing by transferring out, not one of them can be sure they made the right decision!
Understandably it’s a very anxious and worrying time for the former employees and their loved ones.”
Determined to help, Will Harris is concerned that it could happen again as “rogue advisers” and firms continue to be affected by the demise of the sector’s outdated system of commission-based payments.
“We, of course, fully supported the decision to move away from commission payments to a fee based system. However, some salespeople, masquerading as financial advisers, needed to replace the income they’d lost as a result of the ban and the very large pension pots accumulated by British Steel employees became fair game’’.
“The FCA should have realised that the British Steel pensioners were vulnerable and worked with financial advisers to ensure that they had the best possible service,” said Will Harris.
His solution would be for the FCA to open a network of 20 offices around the UK from where staff can monitor the activities of local firms.
Nick Smith, MP, agrees. “The FCA urgently needs to take firmer action on pensions misselling and being closer to the communities affected through a network of regional offices would be a good first step.”
He added: “The FCA is still too focused on the City rather than local communities, and as we saw from the British Steel Pension Scheme crisis, this has allowed sharks to slip through the net.
“More transparent information for consumers combined with being more rooted in different parts of the country would at least help with starting to drive the pensions sharks from the waters altogether.”
Will Harris believes the regional offices should cost no more than £11m per annum, which is not even 2% of the FCA’s budget. It is also much less than the compensation owed to the British Steel pensioners.
As well, Will Harris thinks the FCA should introduce a “star system”, similar to the one adopted by the Food Standards Agency, in scoring establishments that handle and serve food. For example, a firm of financial advisers with a rating of 5 would be judged to have very good standards and another with a 0 to be in need of urgent improvement.
“A star mark wouldn’t be a comment on the quality of advice, in the same way that the star rating for restaurants is no guarantee of tasty food. However, it will give clients, both new and old, a quick and simple “ visual” health check on a particular business. It will also allow them to make a simple, easy to understand, yet informed, judgment on the competence of the firm’s advisers.”
“Each time there is a new pension scandal, we are told ‘it will not happen again’ but, it does happen again. The FCA doesn’t seem to understand the nature of the problem, relying instead on arms-length and aloof regulation.
“The British Steel Pension Scheme scandal has focused the minds of our sector and we call on the FCA to make grass root changes now, for everyone’s peace of mind,” said Will Harris.
You can read the article in full here…
*The Parliamentary Review is published twice a year and “shares best practice amongst policymakers and business leaders.”