Dodgy IFAs. The Warning Signs and the things to avoid
I read a few weeks ago that an elderly man lost £500,000 after a salesman at a bank sold him a pension from a large reputable insurer. It appears the man agreed to put most of his entire life savings into a pension pot that he would never ever see. The man had in fact been diagnosed with Cancer. However, the insurer pocketed his near £500,000 because it is allowed to keep his annuity investment, and the salesman earned a £15,000 commission or his work.
Forgive me, but even if the customer was of sound mind, sadly close to death and had insisted on making the investment, shouldn’t someone have recognised his plight and refused the deal. As I recall a year or so ago that a leading bank was given a £10.5million fine and ordered to pay compensation after nursing home residents were mis-sold their investments.
The customer invested £500,000 into an immediate life annuity, these are usually bought by people upon retirement and typically pays them a fixed income for life. This annuity is different from normal annuities as they can be bought by someone who is 95 or under, rather than 75, you can also use non-pension savings to buy them.
However, alike standard annuities, one of the drawbacks is that once this sort of annuity is taken out, all of the money is given to the insurer, unless of course the saver buys special protection.
The Warning Signs and the things to avoid:
Clients should never be asked to make their cheques payable to the IFA financial adviser business, rather than the investment provider. This is not normal practice as few adviser firms are in fact AUTHORISED to accept client funds via this method. Investors should expect to make their payments direct to either the insurer or the provider. Overall, the advisers do not handle their client funds. If you are asked to invest this way, you need to check and ensure that the firm is authorised to do so.
To check a firm or individual’s regulatory status is a sensible precaution and offers you some peace of mind. The Financial Services Authority’s Register (via www.fsa.gov.uk/register) contains lists of companies and individuals, including their work histories and the authorisation they have.
Clients should expect contact from the investment provider. As their statements should, or at least usually go direct from the investment firm to their customer. If you are not getting or receiving this information at all, then please make sure you check.
If alike me you sometimes have no idea where to look so you can investigate and check advisers out then look no further than:
www.findanadviser.org.uk – this website is a personal favourite as it can list advisers by their region and their qualifications, and what their different qualifications mean.