IFA highlights dangers of whole-of-market advice

Richard Jacobs, director of Staffordshire-based Richard Jacobs Pension and Trustee Services, said he has new clients who have been sold unsuitable products by whole-of-market IFAs who promoted the products as lower risk.

He said: “I had a widow of a vicar in her 80s who was promoted a structured product. She needed income and this was a growth product over six years. Such advice is appalling.”

Mr Jacobs said products such as absolute return funds, exchange-traded funds and structured products were investments promoted by some advisers who do not know enough to examine the nuts and bolts of the product.

He added: “Many IFAs do not actually dig into the risks associated with them. I am seeing this all the time and it worries me. With the retail distribution review around the corner we have got to be whole of market.

“However my worry is advisers are not looking closely at these products. I am not saying we should not promote them, but that we must make sure we understand them and that clients are aware of the risks.”

Mr Jacobs warned that if the trend did not end, the whole-of-market model could collapse

He said: “What worries me is too many IFAs are paying lip service to whole-of-market advice. This will fall straight into the laps of those trying to put us down because they will claim we are promoting products incorrectly and question the point of whole-of-market advice.

“People against whole-of-market IFAs, such as the banks and insurers, are looking for ways to point the finger at us to say that we cannot possibly be whole of market.”

The FSA told advisers last year they must consider all products, including overseas products, if they wish to retain their independent status.

However the regulator later clarified its stance in its November 2011 newsletter. It said: “An adviser providing independent advice needs to consider all retail investment products capable of meeting the investment needs of their clients.

“We would not expect IFAs to review products not available to or targeted at UK consumers.”