FCA should support advice as key weapon to protect consumers

Recently we have written a number of articles about ‘boiler room’ scams, or ‘clone firm’ frauds that in particular have been using the names of legitimate advice businesses, adviser firm employees and even a fake regulatory register to target vulnerable consumers.

The “extraordinary” cloning scam based around deVere’s UK arm, or that using the name of Yorkshire IFA firm G & E Wealth Management Ltd spring immediately to mind from the past few weeks alone.

It seems to be just another of those things the sector, and perhaps most pertinently the regulator, has become accustomed to; an unwelcome but stubbornly persistent presence.

We’ve also written endlessly on the advice gap, although whether it even exists, why it exists, and who and how many it affects are topics that have become the subject of a turf war that continues to cloud the issue.

But every once in a while something lands close to home that reminds us that at the end of the day we’re not dealing with hypotheticals but with the lives of millions of human beings trying to get by and plan for the future, and live secure happy lives.

The parents of a friend of mine stretched themselves to take out a second mortgage and buy the run-down property attached to their house. The idea was to buy the second property and fix it up with the capital held in his grandfather’s savings.

The plan was then that my friend, newly-married, would have been able to move in next door and pay a mortgage-type arrangement to his parents instead of a landlord.

However, the day after his parents had taken out this second mortgage they got a call from his grandfather, who had been cold-called by a firm promising great returns for a new investment opportunity.

He had been the victim of a boiler room scam and had lost it all.

Now, it’s starting to look like the grandfather will have to move in next to the parents having lost all of his savings, leaving my friend and his wife paying rent indefinitely while his parents work just to pay off this second mortgage.

I should note that this isn’t an ‘advice gap’ article per se: the grandfather had more than enough to do business with a financial adviser; enough at least to pique the interests of the fraudsters who made off with it.

It does bring into stark contrast the importance of having a longstanding personal relationship with your financial adviser. No advised client would ever make such a risky series of investments without consulting their regular and trusted IFA (or ‘RFA’, for that matter).

These frauds specifically target the elderly, and the banks do naught to stop them - after all where was his bank while he made one large transfer after another?

I know I’m probably preaching to the choir here, after all I’ve often heard that the most rewarding part of the job you all do is the personal relationships forged and the feeling of having genuinely helped someone achieve the life they wanted.

Some people are eager to point to would-be advice alternatives including price comparison sites and direct-to-consumer services, or to suggest advisers adopt transactional-heavy models. But there is no substitute for an ongoing relationship with a trusted adviser.

It also highlights a very real-world example of why the regulators must do all they can to clamp down on these frauds - and promoting the value of advice and supporting the sector is arguably one of the most effective mechanisms to seeing off many of these emerging threats.