Is this unprofessional conduct or not?

dunstonh

I'm hoping to understand if a lack of integrity and actions that breakdown trust, ie the two most important things IMHO for someone who's advising on your financial future, constitutes poor service or unprofessionalism ie FCA principles 1 & 9.

Trust is a two way street.  It sounds like the firm lost trust in you as much as you did them.

In the end, you need to move on.

On the conflict of interest my point was not the fact they had been given shares but that they left the declaration  until after I signed up to Transact and this, with a lot of other things broke our trust in them; after all if you asking someone to advise on your financial future, you need to trust them and trust is earned.

When Transact started, they were aimed at adviser firms owning a bit of the platform.  This is long before the platforms developed into what they are today.  They stopped offering shares over a decade ago and any volumes held by advisers are tiny.  Indeed, I probably hold more in Aviva, Abrdn, Transact, HL and many more indirectly though unit linked funds.  no advice firm has a controlling interest

Many firms will put their potential conflict of interests in their initial terms of business letter.

The costs increased and when asked to explain it took over 20 weeks to get a breakdown; where does that leave their integrity?

It doesn't surprise me that the costs increased over the period you mentioned.  PI insurance was going through the roof and the regulatory costs were massively increasing and firms were pulling out left right and centre.     As a third party was used in this case, the fees would largely be driven by that third party.   However, the FOS do make it clear that you were informed in advance and you accepted the fees.  So, you had plenty of opportunity to walk away.

Don't advisers set out what's available to you and give data to back up their advice?

No.

IFAs have access to around 80,000 investment funds across all universes and hundreds of providers/products.   It would not be practical to give you a list of all of them.

The job of an IFA is to filter down the options and present what they feel the best option is.   However, where there are multiple options that can achieve a goal, then discussion will often take place on that front.   And if you want more understanding on how they arrived at a recommendation, you can ask questions.

 and should you not compare what you have with what the potential advice will potentially deliver; that was my expectations.

According to the FOS report, they did this.  if they had not, then the FOS would have ruled against them.

[Deleted User]

Linton said:

Deleted_User said:

From FOS report:

The second conflict of interest highlighted by Mr and Mrs C relates to CHFP’s dealings with Transact, the company it recommended they should use for their future pension arrangements. It seems the vast bulk of CHFP’s clients end up using Transact. And that a number of its staff have shares in the business.

Stinks, doesn’t it? 

More info is needed to jump to any conclusions...

from the Transact website:  £53.5Bn under managaement, 218000 clients, 6600 advisors

It is a FTSE250 company (IntegaFin) with a Market Cap of £763M.  So CHFP could be major players or they could be small shaeholders, being merely 1 of the 6600..  In the latter case a few clients is not going to make asignificant difference

I know accountants are banned from owning any shares in any company they deal with. Even if its S&P500. Its allowed to own via a fund or ETF but not directly. Many financial consultancies have similar constraints. Surprised this is allowed in the case of IFAs. Its way too easy for them to have a monthly meeting and say “Transact is da best”.  

It would appear that Transact was buying business early on after it was established by giving unscrupulous advisors a share to direct customers regardless of merit.  Of course the advisors would claim they looked after clients’ interest and any benefit they received from Transact is purely incidental.  

In general, platforms which deal exclusively with advisors tend to limit customers flexibility.  They make it more difficult to leave said advisors.  Hardly in the interest of an average investor. 

Bear_keeper

Thanks for all the comments although I though it was a straight forward question but it looks like none are prepared to answer, which if you are an IFA I can appreciate however I'm struggling with the comment;

"Trust is a two way street.  It sounds like the firm lost trust in you as much as you did them.

In the end, you need to move on."

If there's a genuine reason that anything has changed; put the data on the table and it's then clear for all. (That's professionalism) 

Also if IFAs just give you what they want without data and explanation are they not IF Dictators?

[Deleted User]

Also if IFAs just give you what they want without data and explanation are they not IF Dictators?

I agree 100%.  Their job should be to give you what you need to make an informed decision because its you rather than them who will deal with the consequences.

dunstonh

Also if IFAs just give you what they want without data and explanation are they not IF Dictators?

The data and explanation is given in the suitability report.  The FOS decision confirms this was given to you.
Any potential alternative options that were equally suitable but could have postive/negative outcomes are also given.

The due diligence and research will be on file.  The FOS would have seen it as part of the complaint.  The FOS found it suitable.

However, to expect something like 80,000 options to be put in front of you just isn't feasible.   The whole point of going to an adviser is for them to advise you on what to do.    Not for them to give you options for you to decide as its unlikely you have the knowledge or understanding to make that decision.

Marcon

Bear_keeper said:

Also if IFAs just give you what they want without data and explanation are they not IF Dictators?

Which is why they give recommendations, backed up by data and explanations. The FOS determination confirms yours gave the required data and explanations, so not sure why you are making this comment.

[Deleted User]

“80,000” options is a bit of a red herring.  One would expect to see a few basic options (3-5) for asset allocation, platforms/broker and key funds.  No idea what was actually presented but what happened with the choice of broker really stinks. 

dunstonh

One would expect to see a few basic options (3-5) for asset allocation, platforms/broker and key funds.

Why?

There are thousands of multi-asset funds, for example.  Why should 3-5 of those be shown and not the rest and why let the client choose?  if they knew what they were doing, they wouldn't use an adviser.

What determines a key fund?   There are around 2500 unit trust/OEICs (ignoring ETFs, ITs and pensions & life funds).  Who determines which of those is a key fund?

No idea what was actually presented but what happened with the choice of broker really stinks. 

No it doesn't.   If it was their own brand platform or they had beneficial ownership, then yes, it would.  However, they got paid nothing for putting it with Transact over Standard Life, Aviva or whoever.   Their platform due diligence report would show whole of market comparisons and could have been viewed by the FOS.

The lack of disclosure is a silly mistake but minor as it wouldn't have made any difference to the recommendation.  And they did disclose it before the application.  So, they caught it in time.

[Deleted User]

Why? The short answer is “because you are an advisor as opposed to asset manager”.  Advisors should provide options and supporting information for the client to make an informed decision. Money managers take the money and manage them for clients. That’s how I interpret the meaning of “advisor”.

In my industry (engineering) as consultants  we always present the client with options of various conceptual solutions. We outline advantages and disadvantages and make recommendations. The client makes a call because its his money and responsibility. And he may be aware of additional considerations we know nothing about. We then go away to develop detailed and final designs which the client gets to review. 

The exact fund is detail which does not matter all that much. The concept is important.  Does the client want simplicity, something he can easily manage himself? Are low cost options a priority? Degree of passive vs active? Allocation to UK? Asset classes outside stocks and bonds? Once these conceptual issues are resolved, three example solutions should suffice. 

With regards to platform CofI… Companies award employees shares for a reason. They want them to have vested interest.  Why did employees of this firm end up owning stock in the brokerage outfit? Why are they keeping it? Surely its easier to get rid of these shares and avoid the conflict as well as having to explain?  Why are they sending clients to this particular broker out of dozens available on the market?

  But that’s not all.  As far as I can tell this broker works exclusively with advisors.  That’s another conflict.  The advisor is making it harder for the client to start managing investments by himself.  Whose interest is that in exactly? 

dunstonh

Why? The short answer is “because you are an advisor as opposed to asset manager”.  Advisors should provide options and supporting information for the client to make an informed decision. Money managers take the money and manage them for clients. That’s how I interpret the meaning of “advisor”.

You may wish to make your case to the FCA then when you next visit the UK.

The exact fund is detail which does not matter all that much. The concept is important.  Does the client want simplicity, something he can easily manage himself? Are low cost options a priority? Degree of passive vs active? Allocation to UK? Asset classes outside stocks and bonds? Once these conceptual issues are resolved, three example solutions should suffice. 

All these things are taken into account during the advice process.   Due diligence and research will be available for those that want the detail.   99.9% of people do not.

The advice process filters out so much that you are left with the recommendation.    UK regulation for IFAs is to provide best advice.  It isn't to provide three to five options which may or may not be the best.

Why did employees of this firm end up owning stock in the brokerage outfit? Why are they keeping it? Surely its easier to get rid of these shares and avoid the conflict as well as having to explain?

You may be right.  However, there are millions of people, some of whom will be advisers who will hold shares in Standard Life and Aviva  (and other demutualisations) who consider their holding inconsequential.    Some people hold onto these small holdings for no particular reason.

Why are they sending clients to this particular broker out of dozens available on the market?

The advice process would cover that and the research would be on file.  Transact is one of the UKs better platforms in terms of software, and its charges for those over £60k invested are reasonable and even better for over £600k.    

I don't know if you read the FOS decision but its clear that what the OP has said and that the published ombudsman decision says are two different things.   Remember that the published decisions have gone through the complaints process of the adviser firm and been rejected. They have gone through an independent adjudicator at the FOS and been rejected.  And they have gone through a Senior ombudsman and been rejected.  Nobody found fault with the advice or outcome.  Just a couple of very minor issues that do not affect the outcome.

 But that’s not all.  As far as I can tell this broker works exclusively with advisors.  That’s another conflict.  The advisor is making it harder for the client to start managing investments by himself.  Whose interest is that in exactly? 

In the UK, the platform market is almost totally split between those that offer services via advisers only and those that offer services to the consumer directly.   Very few do both and those that do tend to fudge it that they are not very good for advisers to use and not very good for consumers to use.

UK regulation requires no obstacles to move between the models.  So, if a person doesn't want to use an adviser anymore then they can move to another platform at no cost.   So, no conflict whatsoever.   If the person tells the adviser during the advice process that they want to DIY, the adviser will put them in a solution that caters for the DIY market.   However, it would have to be one of those fudged options as most DIY platforms will not take instructions or business from IFA.  So, in the case of DB transfers, it would often be a case of moving it to a platform, leaving it in cash and letting the client then move it to their preferred platform as soon as they can thereafter.