Adviser blasts FSA’s stance on life policies

Mr O’Halloran, chartered financial planner for Lincolnshire-based O’Halloran & Co, questioned why the FSA denounced traded life policies while simultaneously issuing proposed guidance on whether the investments should be available to retail investors.

He claimed the consultation, which ended on January 23 2011, had been made redundant by its own wording, which described traded life policies as toxic products that should not be marketed to retail investors.

He said: “The FSA made a public statement on traded life policies and at the same time issued a consultation document.

“How can you consult when you have already made a deliberation and a statement of intent?”

Mr O’Halloran uses traded life policy investments for some clients and he said they can be beneficial.

He warned that if the FSA banned traded life policies, it would only damage consumers because they will no longer have the opportunity to access the funds.

Mr O’Halloran said: “If anything is toxic and poses a significant risk for retail investors, surely the stock market does. Any number of share-holding investment funds could pose a significant risk for retail investors.

“Life policies have a guaranteed sum assured, a guaranteed premium and because they are impaired life they would seem to be more secure than the majority of shareholding funds.”

He added: “There is a whole industry that is apoplectic about this whole affair. The FSA has damaged the consumer, not the advisers.”

The launch of the guidance consultation in November last year drove traded life policy provider EEA Life Settlements to suspended dealings in its Life Settlements fund after “unprecedented levels” of redemption requests from advisers and institutional investors.

The FSA was invited to comment but has yet to respond.