Natalie Holt 22nd
Advice firms are in the business of providing valued services to clients: financial planning, managing investments tax-efficiently, and for some firms, helping clients to achieve their life goals. This is what the advice profession is built on.
Sadly there are all too many stories that detract from this, of rogue firms and misled investors, of significant losses and untold consumer detriment.
The good firms (that is, the majority of advice businesses) are working hard to deliver great client service, and because they are in the business of advice, they are looking to do this profitably. But they are being thwarted in their efforts, as it is getting harder and harder to deliver advice profitably. The bad guys keep on coming, and the Financial Services Compensation Scheme levies – which at the last count totalled £119m for life and pensions advisers and £116 for investment advisers – keep on climbing.
It is nigh on impossible for advisers to budget for those kind of bills. Yet trends are emerging which signpost the potential troublespots for advisers.
What used to be a focus on unregulated collective investment schemes has morphed into claims related to Sipp failures. Claims are not just coming in at an advice level, but against admin firms and Sipp providers too.
Then there are film partnership schemes, which thanks to recent action from HM Revenue & Customs have now fallen squarely into the “aggressive tax avoidance” camp. It is predicted film partnerships will be responsible for pulling out the rug from underneath many an advice firm in the not-too-distant future.
And the difficulty is the market continues to evolve. The next misselling scandal is never too far away.
Firms can look to regulatory updates from the FCA and the FSCS to pinpoint the next wave of claims. Yet this is likely to be small comfort, as knowing what the troublespots are does not help if you know you did not give advice in these areas. The ripple effect of claims is such that the cost will turn up in FSCS levies regardless.
But nevertheless, forewarned is forearmed. We live in hope that one day stories about the value of advice will outweigh the headlines about million pound investor losses.
In the meantime, advisers are quietly resigned to setting aside yet more money to cover the sins of others. FSCS reform looks a long way off, but has never been more critical.