Innappropriate Investments

MoneySaverLog

SnowMan wrote: »

To me that's a bit like someone saying the moon landings didn't occur.

The only difference is that there must be a very small chance that the moon landings didn't actually happen

I for one do not believe they landed on the moon either.

SnowMan

Meeper wrote: »

When are you guys going to realise that we are no longer in the 1980's and the advice process has moved on leaps and bounds since then? This rhetoric and attacks on all IFA's as commission-grabbing salesmen is getting somewhat tiresome.

If IFAs want to post on here that commission bias is and never has been a major problem then they are entitled to do so.

I am entitled to challenge those assertions when made and post an alternative view that commission bias has been and still is a problem. Whether you find that tiresome is of no relevance.

My comments don't relate to all IFAs they relate to commission based IFAs.

dunstonh

The simple issue was that advising the client to leave their deferred pension in the company pension scheme paid the commission based IFA no commission, advising them to transfer paid them huge commission. It really was as simple as that. There was no way the commission based IFA was going to advise people to stay put in their company scheme. I remember when the review was going on an IFA telling me, and fair play to him for his honesty, that advising the client to transfer 'was the only way to put money on the table for his wife and kids'.

Why focus on issues from over 20 years ago to suggest that the same could happen today?

It was the huge commissions that the IFAs got for recommending the transfers that meant that there was a less than even chance of beating the company scheme. The transfer values offered by the schemes did not take into account those huge commissions, why should they. By transferring, those affected by the IFA mis-selling lost their guaranteed pension and were subject to the vagaries of the stock market, in a bet that because of the huge commissions they were odds on to lose.

The pensions review was largely a hindsight error. Had 1970s and 1980s figures continued, then everyone would have been better off. Even the Govt encouraged at the time thinking the same thing. Commission didnt create mis-sales. It created opportunity but the problem was the decision making process using, with hindsight, inappropriate assumptions. Consumer protection kicked in when that was realised and anyone given bad advice was compensated.

Commission based IFAs advised people to take out endowment mortages because it paid them huge commission. Advising the client to take out a repayment mortgage paid them none. It wasn't a balanced discussion on the relative merits of repayment and endowment, they simply told people that the endowment was bound to do better than the repayment mortgage.

Most endowments were sold before IFAs existed. So, why are you so focused on IFAs?

Things are no different now then they were 10 years ago and it is pretty obvious why not. Just last week we heard of the fine for the recent IFA mis-selling of investment bonds.

You had company owned by HSBC using sales reps being fined.

To pretend that the pension mis-selling and endowment mis-selling scandals were minor in relation to IFAs is frankly ridiculous. The losses redressed amounted to billions.

Billions? now you are on the moon.

This rhetoric and attacks on all IFA's as commission-grabbing salesmen is getting somewhat tiresome.

It is. You try and enter a debate on the issues but things get twisted or ignored to allow the same rubbish to posted again and again. Notice how its all about IFAs now and not FAs. That is despite salesforces overwhelmingly being the cause of majority of issues. Salesforce management and targets having already been mentioned as a major cause of trouble. IFAs had just over 3000 complaints at the FOS last year (and Towry Law's issues accounted for a great chunk of those). Yet the millions of transactions that IFAs handle is ignored. No-one can claim perfection but this thread is getting silly.

Ark_Welder

dunstonh wrote: »

...this thread is getting silly.

It's what happens when there are trolls around. Or others that just generally have a chip on their shoulder.

SnowMan

dunstonh wrote: »

Billions? now you are on the moon.

The BBC reported the total cost to the industry of pensions mis-selling of 11.8 billion in this article. I don't know the split between direct sales and IFAs but it is a lot of money all the same.

As Malcolm McLean (then of the Pensions Advisory Service) says in that article.

It just shows the extent of the mis-selling. The whole point of this exercise was to put people back in the position they would have been in the first place.


This was a massive debacle. It should never have happened and hopefully people will learn from it. We just hope it never happens again

It seems if anyone dares challenge the IFA view, they are classed by the IFAs on here as silly or trolls.

One poster earlier was even subjected to what I would class as a homophobic remark by meeper (which has now been deleted by the forum team). Quite disgraceful.

Ark_Welder

SnowMan wrote: »

It seems if anyone dares challenge the IFA view, they are classed by the IFAs on here as silly or trolls.

Some manage to combine being silly with being a troll. And not everyone that makes that statement has had anything to do with either offering financial advice or any other involvment in the financial sector.


http://www.fsa.gov.uk/Pages/Library/Communication/PR/2002/010.shtml

Details of progress of phase 2 of the Pensions Review (based on December 2001 returns) :

Total -|- Product Providers and Bancassurers -|- Networks and Large IFAs -|- Small IFAs Requests for Review 1,248,631 1,085,856 103,185 59,590
Cases for Review (a) 833,124 743,159 53,466 36,499
Assessments complete (offers made plus cases where no redress due) 699,455 629,594 47,690 22,171
As a % of (a) 83.96% 84.72% 89.2% 60.74%
Offers made 567,556 518,810 39,075 9,671
Offers accepted 513,592 467,080 37,623 8,889
Amount of redress Accepted 4,431 million 3,934 million 406 million 90.7million

sabretoothtigger

Its slightly ironic that Darkpool is a term for those who engage in concealed trading
:think:

Meeper

SnowMan wrote: »

It seems if anyone dares challenge the IFA view, they are classed by the IFAs on here as silly or trolls.

You make statements like "IFA's on here deny that mis-selling exists or has ever existed", and expect to be taken seriously. Any IFA will tell you that many years ago there was a very definite issue with advice which was given, in the pre-regulation era. Now, there is still an element of poor advice which goes on but not even nearly in the same ballpark as you are trying to point out. As Dunstonh has mentioned, IFA's handle millions of transactions every year, and there were 3000 complaints last year, a big chunk of which were down to Towry Law.

I never mind my view being challenged, but be sure to challenge it with substance and not just the same old boring rhetoric about mis-selling and commission-grabbing.

One poster earlier was even subjected to what I would class as a homophobic remark by meeper (which has now been deleted by the forum team). Quite disgraceful.

Ridiculous, in my view. I put the words "Negative N****" (insert name of Ronald Reagan's wife) in the post, which is a term that I have used for as long as I can remember, defined as "Someone who commonly whines, complains, or looks at the bad side of things." Nothing homophobic or any other phobic about it. Well, perhaps it was negativophobic, but I don't think that's a real word. Perhaps it should be. Anyone who compiles dictionaries should come on here, then they would read these threads and your posts and put negativophobic in the dictionary as someone who has you on their ignore list.

SnowMan

Meeper wrote: »

Ridiculous, in my view. I put the words "Negative N****" (insert name of Ronald Reagan's wife) in the post, which is a term that I have used for as long as I can remember, defined as "Someone who commonly whines, complains, or looks at the bad side of things." Nothing homophobic or any other phobic about it. Well, perhaps it was negativophobic, but I don't think that's a real word. Perhaps it should be. Anyone who compiles dictionaries should come on here, then they would read these threads and your posts and put negativophobic in the dictionary as someone who has you on their ignore list.

Fair enough. I don't think it is a good term to use for many reasons but thank you for clarifying the n word wasn't intended in a homophobic way.

Rollinghome

dunstonh wrote: »

The FSA have said that.

The FSA have spent years trying to deal with the problem and, despite the threats and lobbying from the investment industry and IFAs, they have decided to ban commission from the end of next year.

But on the one one side we still have the investment industry who pay salesmen/advisers commission. and the dodgier old-time salesmen/advisers who take it, who insist it's not a problem.

On the other side we have the FSA, the Consumer Association, and every reputable independent commentator who say it is. The more honest in the industry itself such as Justin Modray, himself an IFA who has campaigned against commission, also agree.

Paul Lewis, the award-winning consumer journalist and presenter of BBC Moneybox, told IFAs at a seminar:
"At the heart of every miss-selling scandal is the problem of commission."

He goes on to say:
“So my solution to the problem is to stop calling the commission driven sales process ‘advice’ – it isn’t. It’s selling. And stop calling it ‘financial’ – it’s a small subset of financial – leaving out tax, benefits, budgeting, cash savings, redress, compensation, credit cards, direct debit, current accounts and so on. It is about pensions, investments, insurance, and mortgages. And that is it. So call it sales related guidance. And keep the normal English term financial advice for what the public yearns for – what the millions of people who read the newspapers and listen to the radio and television and surf the internet desperately want. Genuine impartial advice about their money – separated from the sales process.” http://www.web40571.clarahost.co.uk/archive/talks/20071105FSRF.htm

It isn’t tricky. The investment managers aren’t charities and the reason they pay IFAs very substanial commission certainly isn’t to give free advice – any more than double-glazing salesmen are paid to give free advice. They are paid to sell their investment products.

Which is of course the reason why some IFAs have been so desperate to keep sales commission: because the investment managers value their services as salesmen far more highly than their clients value their ability to advise. Large numbers of IFAs will be leaving the industry when commission is banned because they realise for them the game is up. Of course the cleverest will continue to find ways to conceal their charges just as they do now and IFA firms will continue to pay their staff sales commission and bonuses.

More on commission from Paul Lewis and Mick McAteer of Which?, a transcript of one of the Moneybox programmes, at http://www.gravitaslaw.co.uk/wp-content/uploads/MoneyBox-Commission-transcript.pdf

LEWIS: Mick McAteer, Principal Policy Officer of the consumer
organisation Which?. He doesn’t mince his words.

McATEER I really do think all the mis-selling scandals like
pension mis-selling and mortgage endowments and products with massive
front-end loaded charges and rip-off products can be traced back to the reliance
on commission and the kind of business models that reward staff according to
how much they sell rather than the quality of the sale. I think much of the
detriment in the UK financial services industry can be traced back to
commission.

Of course the old-time salesmen/"financial advisers" will desperately claim otherwise. They would wouldn’t they.