IFA - professional conduct ?

Ascerco

Hello,

I have recently engaged an IFA for the first time. Without going into tonnes of detail I have a reasonable sum of money to do something with. As I don’t even have ISAs my plan was to focus on them and pension. I’ve been assessed as having a level 4 attitude to risk.

However my IFA emailed me with an investment opportunity for a product being launched by a personal friend. This stuck me as odd and potentially unethical and unprofessional. As a ‘4’ of course my reaction is one of caution but it this acceptable behaviour from the IFA? It also makes me feel rather distrustful of their other advice but of course I could be overreacting.

Linton

Sounds odd. Can you give an idea as to what the "opportunity" offered? No need to give names. Are you sure you were talking to an IFA?

Ascerco

Hi Linton

Yes they are an IFA 100%. I have engaged them in reviewing my pension. They completeled all that work with recommendations on combining my defined contribution pension and the funds they recommended. I took it all away to review and make a decision on. Then a few days later I get an email about a new food product their has developed and is ready to bring to market but is looking for an investor for that part. The offer was did I want to find out more rather than a specific request for money. I don’t think it’s dodgy just unprofessional really and I feel less trustworthy about their advice now.

dunstonh

However my IFA emailed me with an investment opportunity for a product being launched by a personal friend. This stuck me as odd and potentially unethical and unprofessional.

Are you sure this is an IFA? An awful lot of the investment scams have people pretending to be an adviser.

However, if it is, then walk away now (and if not still walk away). Business should be kept at arms length from personal relationships.

As a ‘4’ of course my reaction is one of caution but it this acceptable behaviour from the IFA?

No. It is not normal. It is not something you would expect. It is important to note that an IFA is a financial planner but also an arranger of "packaged investments". i.e investments held in an ISA, pension, bond etc. Whilst IFAs do have to consider unregulated investments as part of their remit, it is generally regarded that you need at least £500k and no more than 5% should go into such things.

IFAs, like all financial firms, should have a conflict of interests policy and conflicts of interest register to make available to the FCA should they ask for it. Promoting a business opportunity of a friend is a conflict of interest in my book and is not an investment. There is a difference between investment and business opportunity.

Technically, if that conflict is declared (which it appears to be) and you are open to discussion on it, then no rules have been broken. However, ethically I would not be happy with it and if any of the advisers working for me did it, they would be out.

is this "adviser" a sole trader or part of a larger firm? If part of a firm, then the firm compliance officer may well be interested as a recommendation from an adviser is still a recommendation with liability to the firm. Even if it is an unregulated investment.

Ascerco

Thanks Dunstonh - I appreciate your reply.

The IFA is part of a v small long established local firm and has themselves worked there many years.

I will have a think about how best to proceed - I think this is probably just poor judgement on their part but having paid (or about to pay) £500 for the pension review and recommendations I feel much more skeptical of their recommendations- on the plus side it’s probably better to form my own opinion on their recommendations rather than just go along with them.

Alexland

It sounds like more than a coincidence that a friend is involved and it doesn't sound like the IFA is considering the whole of the market options. It sounds like they have done good work so far but they shouldn't just be throwing promotions at you. Avoid.

LHW99

Just a thought - I have heard of scams where someone buying a house is prompted to send deposit money to a "revised" solicitor account. I don't know how people's contact details are obtained for that.
Could this be something similar, where the email appears to come from the IFA firm, but is actually from a scam source imitating the IFA details, and trying to get money by persuading you a) its a good idea and b) to send money to "the IFA's" account - the details of whick are actually a scammer's?

badger09

LHW99 wrote: »

Just a thought - I have heard of scams where someone buying a house is prompted to send deposit money to a "revised" solicitor account. I don't know how people's contact details are obtained for that.
Could this be something similar, where the email appears to come from the IFA firm, but is actually from a scam source imitating the IFA details, and trying to get money by persuading you a) its a good idea and b) to send money to "the IFA's" account - the details of whick are actually a scammer's?

That was my thought.

OP, one way to find out is to phone the IFA on the number you know to be genuine, and ask if he has sent you an email about this investment opportunity.

Ascerco

I’m certain that’s not the case as it was an offer to put me in touch direct with the person. But it’s a useful reminder!!

Albermarle

I think this is probably just poor judgement on their part but having paid (or about to pay) £500 for the pension review and recommendations I feel much more skeptical of their recommendations

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I am not that well informed about IFA charges but £500 seems a bit low , maybe suspiciously low?