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Retirement was ruined by a financial planner
capital0ne
Posts: 872 Forumite
Sunday Times today has an article about how a financial planner lost a couple's ritiement fund of £400,000, and the advisor is still working - company he worked for has gone bust tho'! So be careful out there.
Here' are few key points:
"A financial planner whose bad advice cost a couple almost £400,000 has been able to continue working in the industry while his former clients live with the consequences of his recommendations. The adviser simply moved to a new firm, raising concerns about the apparent ease with which people can continue to offer advice after making costly blunders."
Presumably a financial planner is just executing an (I)FA's advice, so make sure this is carried out as advised, planners really don't have the same qualifications as an (I)FA.
"David and Sheila Solomon lost most of their pension savings after Paul Herd advised them to move the money into a high-risk fund in 2010, even though they had said they were cautious investors who wanted to retire just four years later."
Herd worked at the Plymouth-based MFS Partnership at the time.
"A year later, Herd encouraged them to ignore a written warning from their pension provider about the risks of the investment fund. In 2013, the fund stopped withdrawals after it hit financial difficulties, trapping their money."
"The Solomons appealed for help from the Financial Ombudsman Service, which ruled in March 2016 that MFS should pay them almost £500,000 — what their pot would have been worth had it been invested properly, according to a formula set by the ombudsman."
"Last November, the couple were awarded £50,000 each, the maximum the FSCS is allowed to pay investors. A month later they received a cheque for £2,921 from the liquidator of MFS as unsecured creditors of the now defunct company."
"This leaves the Solomons with a loss of almost £190,000 on their original investment in the fund — and almost £400,000 less than the ombudsman said their investment should have been worth."
"The couple were appalled, therefore, to discover that the financial adviser who had ruined their retirement plans was working for another firm, Elite Wealth Management in Penzance, Cornwall. Herd is described on the website as having “extensive knowledge” of pension and retirement planning."
"Herd was recommended to the Solomons in 2007. At the time, he was an employee of Financial Ltd, a network of independent financial advisers."
"The couple’s combined pension pot was initially worth £346,687, but by August 2010 it had dwindled to £281,520 after Herd recommended they invest in commercial property, which performed badly during the financial crisis."
To cut a long story short this is the remainder of the article:
The Solomons learnt of his new role only last month, when they googled Elite after receiving an update from the liquidator. Herd is described on the website as a “chartered financial planner” who has had “excellent training”.
However, Alan Powell, director of Elite, told Money Herd does not operate as a chartered financial planner for the company. Instead, he advises only on “protection” products, such as life insurance, and acts as a paraplanner, helping other advisers at the firm. The website makes no mention of Herd’s time at MFS.
Powell said that Elite had applied for Herd to be registered with the Financial Conduct Authority (FCA), the regulator. This would allow him to offer advice on a full range of products, including pensions and investments. Powell said the FCA had rejected the application and an appeal had been lodged.
“I’m a great believer in giving people a second chance,” said Powell, who admitted that he was aware of Herd’s record. “If the FCA comes out and says, ‘Right, our final decision is that he’s not fit and proper,’ we will get rid of him.” He said Elite was not breaking any rules with its website description of Herd.
When contacted by Money, Herd said he would be prepared to comment but then did not do so. The Solomons received nearly £90,000 in 2016 from Tavistock, which took over Financial Ltd, as a settlement for the commercial property investment he recommended.
The FCA declined to comment on his individual case. It said advisers who had “qualified at chartered level” were allowed to “use the relevant designatory symbols against their name”. This applies even when they have been found to have given incorrect advice.
The Chartered Insurance Institute, which sets exams for advisers and accredits them as “chartered”, has a code of ethics that requires members to adhere to the “highest professional and ethical standards”. Failure to comply “may result in disciplinary action”. It is not clear how the institute tests adherence to the code of ethics.
Keith Richards, a managing director at the institute, said it was “not automatic” that an individual was in breach of the code if the ombudsman ruled against him or her. However, he said he would discuss Herd’s case with the FCA this week, adding: “We work with the FCA to ensure the advice market adheres to principles of treating consumers fairly.”
Here' are few key points:
"A financial planner whose bad advice cost a couple almost £400,000 has been able to continue working in the industry while his former clients live with the consequences of his recommendations. The adviser simply moved to a new firm, raising concerns about the apparent ease with which people can continue to offer advice after making costly blunders."
Presumably a financial planner is just executing an (I)FA's advice, so make sure this is carried out as advised, planners really don't have the same qualifications as an (I)FA.
"David and Sheila Solomon lost most of their pension savings after Paul Herd advised them to move the money into a high-risk fund in 2010, even though they had said they were cautious investors who wanted to retire just four years later."
Herd worked at the Plymouth-based MFS Partnership at the time.
"A year later, Herd encouraged them to ignore a written warning from their pension provider about the risks of the investment fund. In 2013, the fund stopped withdrawals after it hit financial difficulties, trapping their money."
"The Solomons appealed for help from the Financial Ombudsman Service, which ruled in March 2016 that MFS should pay them almost £500,000 — what their pot would have been worth had it been invested properly, according to a formula set by the ombudsman."
"Last November, the couple were awarded £50,000 each, the maximum the FSCS is allowed to pay investors. A month later they received a cheque for £2,921 from the liquidator of MFS as unsecured creditors of the now defunct company."
"This leaves the Solomons with a loss of almost £190,000 on their original investment in the fund — and almost £400,000 less than the ombudsman said their investment should have been worth."
"The couple were appalled, therefore, to discover that the financial adviser who had ruined their retirement plans was working for another firm, Elite Wealth Management in Penzance, Cornwall. Herd is described on the website as having “extensive knowledge” of pension and retirement planning."
"Herd was recommended to the Solomons in 2007. At the time, he was an employee of Financial Ltd, a network of independent financial advisers."
"The couple’s combined pension pot was initially worth £346,687, but by August 2010 it had dwindled to £281,520 after Herd recommended they invest in commercial property, which performed badly during the financial crisis."
To cut a long story short this is the remainder of the article:
The Solomons learnt of his new role only last month, when they googled Elite after receiving an update from the liquidator. Herd is described on the website as a “chartered financial planner” who has had “excellent training”.
However, Alan Powell, director of Elite, told Money Herd does not operate as a chartered financial planner for the company. Instead, he advises only on “protection” products, such as life insurance, and acts as a paraplanner, helping other advisers at the firm. The website makes no mention of Herd’s time at MFS.
Powell said that Elite had applied for Herd to be registered with the Financial Conduct Authority (FCA), the regulator. This would allow him to offer advice on a full range of products, including pensions and investments. Powell said the FCA had rejected the application and an appeal had been lodged.
“I’m a great believer in giving people a second chance,” said Powell, who admitted that he was aware of Herd’s record. “If the FCA comes out and says, ‘Right, our final decision is that he’s not fit and proper,’ we will get rid of him.” He said Elite was not breaking any rules with its website description of Herd.
When contacted by Money, Herd said he would be prepared to comment but then did not do so. The Solomons received nearly £90,000 in 2016 from Tavistock, which took over Financial Ltd, as a settlement for the commercial property investment he recommended.
The FCA declined to comment on his individual case. It said advisers who had “qualified at chartered level” were allowed to “use the relevant designatory symbols against their name”. This applies even when they have been found to have given incorrect advice.
The Chartered Insurance Institute, which sets exams for advisers and accredits them as “chartered”, has a code of ethics that requires members to adhere to the “highest professional and ethical standards”. Failure to comply “may result in disciplinary action”. It is not clear how the institute tests adherence to the code of ethics.
Keith Richards, a managing director at the institute, said it was “not automatic” that an individual was in breach of the code if the ombudsman ruled against him or her. However, he said he would discuss Herd’s case with the FCA this week, adding: “We work with the FCA to ensure the advice market adheres to principles of treating consumers fairly.”
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Comments
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No one will ever take better care of your money than you. Never put money into something you don't fully understand even if it is recommended by someone with some financial credentials.
One of the issues I have with using an FA or IFA is that it's often just a way to avoid actually learning a bit about financial management. People think that they can pay someone to worry about their money for them and then give up control and can end up in a bad situation. Whether you use an FA or IFA or not you must know what is happening and have complete control over your money. You tell the advisor what to do, not the other way round.“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
He gave them a recommendation and they didn't research that option before doing it. He didn't lose them the money-they did.
It was a high risk investment that didn't go in their favour, IMHO if you play with fire you run the risk of getting burnt. They could have put the money in a lower risk investment or a NO risk investment and accepted the low interest rate and return. He didn't hold them at gunpoint to follow his advice.
That may sound harsh but as Boston has said above, you decide what to do not the advisor.Just a single mum, working full time, bit of a nutcase, but mostly sensible, wanting to be Mortgage free by 2035 or less!0 -
The Times ran the story in September 2016 (after the Ombudsman had ruled earlier that year what they should be paid out and it was clear that MFS could not pay it) and there was a thread about it here.
The bits you snipped out from their article this time around include the fact that the big investment made by Herd was an an unregulated Isle of Man- based opportunity, New Earth Solutions Recycling Fund. This was several years before he moved over to become a partner at MFS taking his clients with him. The advice was totally unsuitable and their insurers wouldn't cover the loss for him advising on that type of investment.
I tend to agree with some of the other comments on the Times's article and also Boston above, that if you use an advisor you should look at what it is he's advising you to do, and take some personal responsibility.
The person whose money was lost was a retired insurance underwriter and presumably not without some conceptual understanding of risk and how it can be diversified away. Putting nearly all your and your wife's life savings into an unregulated Isle of Man based 'recycling fund' does not seem at all prudent, Neither does sticking with the adviser who put you in property assets which lost you about 20% in the credit crunch when you were not expecting they could go down. When your pension provider writes to you warning about the extreme high risk of the investment, it is worth heeding the warning rather than letting the advisor, who lost you money in the past, tell you "nah, it's not risky, ignore that warning".
When the Sunday Times last did an article on the couple (before MFS had gone bust and sold off its client book for a nominal amount), they mentioned that when Herd was at Financial (the advisor network) well before he moved over to MFS, the SIPP trustee warned Financial as the advisory firm about the investment and its high risk nature as an unregulated collective investment scheme. In turn, Financial wrote to the couple on multiple occasions, and warned them that it was not actually suitable for cautious investors, and offered numerous opportunities to get out of it.
However, Herd wrote his own letters to them, saying that his employers were going to be writing to warn them off the investment and they should ignore it because his employers misunderstood the risk, and they should trust him personally and not his professional network, and avoid exit penalties by just staying with it.
Despite the fact that their investment in the venture was something like £280k and not their original £350k - as a result of him having first lost them £70k in commercial property funds during the credit crunch - for some reason they decided to trust his poor advice again and ignore all the warnings they were sent.
And now they find themselves almost a couple of hundred thousand down, even after £190k of compensation payouts.
This is certainly a cautionary tale, though it is as much about keeping yourself aware about who is doing what with your finances and why - because there will be an occasional bad apple out there - rather than a warning to stay away from financial advisors in general. I wouldn't touch Mr Herd's advice with a bargepole, although if it is as his current employer says, that he's a paraplanner supporting the work of others and his advice is only in certain limited areas, perhaps there is now less for him to screw up.
He didn't, but he did plead with them to follow his advice rather than the advice of their pension trustee and his IFA network who warned multiple times that it was a high risk investment, unsuitable for people like them, and offered the opportunity to exit before it went south.He gave them a recommendation and they didn't research that option before doing it. He didn't lose them the money-they did.
It was a high risk investment that didn't go in their favour, IMHO if you play with fire you run the risk of getting burnt. They could have put the money in a lower risk investment or a NO risk investment and accepted the low interest rate and return. He didn't hold them at gunpoint to follow his advice.
Unfortunately it is perhaps due to the advocacy of people like capital0ne - that you can't trust financial firms especially advisory ones - that this couple decided to trust the individual person across the desk from them, rather than his employer at the time and the people writing all the risk warnings on the product. Being poisoned by one bad apple doesn't mean you should avoid all apples and just eat red meat instead, but you should look out for warning signs.0 -
bostonerimus wrote: »No one will ever take better care of your money than you. Never put money into something you don't fully understand even if it is recommended by someone with some financial credentials.
One of the issues I have with using an FA or IFA is that it's often just a way to avoid actually learning a bit about financial management. People think that they can pay someone to worry about their money for them and then give up control and can end up in a bad situation. Whether you use an FA or IFA or not you must know what is happening and have complete control over your money. You tell the advisor what to do, not the other way round.
A key point here is that he was not a qualified IFA. I suspect he was both charming and convincing, hence he was able to win over his clients, and reassure them. I know from dealing with trades, that the most charming and persuasive are often the worst at their job,
I wonder if there have been similar cases with an IFA? In the past there was the issue of churning, whereby an (I)FA would advise someone to buy and sell funds more often than needed in order to generate commission for the (I)FA. The current rules have removed this conflict of interest as advice must be paid for up front.
Incidentally some people really do need help with finances, and struggle with the basic concepts. Other people don’t want to spend time managing their investments.0 -
BananaRepublic wrote: »
Incidentally some people really do need help with finances, and struggle with the basic concepts. Other people don!!!8217;t want to spend time managing their investments.
A retired insurance underwriter should have a high degree of common sense even if not an expert in particular fields. Perhaps he was happy to take the risk offered by the invstment believing that if matter did go wrong.Bowlhead wrote:
as a result of him having first lost them £70k in commercial property funds during the credit crunch - for some reason they decided to trust his poor advice again and ignore all the warnings they were sent.
Commercial property lending brought HBOS down. Likewise made Lloyds the 4th largest house builder in the country, owning Cala Homes and McCarthy & Son amongst others.
Blaming an individual sometimes needs to be kept in perspective in light of all the facts. Hence why the relationship probably continued.0 -
Thrugelmir wrote: »A retired insurance underwriter should have a high degree of common sense even if not an expert in particular fields. Perhaps he was happy to take the risk offered by the invstment believing that if matter did go wrong.
My comment was in response to Boston hence the above has no relevance to it.
But to address the point you make, yes of course it is surprising that an insurance underwriter got himself into such a situation. You would think he would know better.0 -
BananaRepublic wrote: »My comment was in response to Boston hence the above has no relevance to it.
But to address the point you make, yes of course it is surprising that an insurance underwriter got himself into such a situation. You would think he would know better.
I think that’s a little bit unfair, I worked in the finance industry but with mortgages, I am pretty clued up on the, but investments I really don’t have a clue and are terrified that I will get it wrong. That is why at the moment all my savings are in cash and I know that isn’t the best strategy but I won’t loose my savings.0 -
He gave them a recommendation and they didn't research that option before doing it. He didn't lose them the money-they did.
It was a high risk investment that didn't go in their favour, IMHO if you play with fire you run the risk of getting burnt. They could have put the money in a lower risk investment or a NO risk investment and accepted the low interest rate and return. He didn't hold them at gunpoint to follow his advice.
That may sound harsh but as Boston has said above, you decide what to do not the advisor.
I might have come off blaming the investors a bit too much in my original post. The advisor was also to blame, it's pretty difficult to lose so much, the couple would have been just fine with a sensible portfolio of stock and bond funds.“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
If you don't know your 4rse from your elbow though - you're supposed to go to these financial people, who are regulated to do the right thing.
If you don't know your 4rse from your elbow ... you have to trust professionals because ... you don't know your 4rse from your elbow.
Those capable of doing their own research probably wouldn't need any professional help, they can research and understand.
These people do it all day long, they study, they know, they chat about, they watch, they notice.... they are supposed to be professionals who listen and do the right thing ...
Otherwise, what's the farquin point of bothering to ever call any financial advisor about anything?0 -
I think that’s a little bit unfair, I worked in the finance industry but with mortgages, I am pretty clued up on the, but investments I really don’t have a clue and are terrified that I will get it wrong. That is why at the moment all my savings are in cash and I know that isn’t the best strategy but I won’t loose my savings.
No, but they will lose value due to inflation. It's your choice what you do with your money, but it might be beneficial to you to do some reading on investment and ask questions on here.0
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