This week, there is one place where any advice gap has actually closed: Prison.
In the Slammer
On Wednesday a financial adviser was sent to prison for two and a half years after he made thousands of pounds in commission by submitting insurance policy applications on behalf of clients who did not actually exist.
Mark Watson, of The Vita Partnership in Sevenoaks, was previously a member of Sesame network. Commission would be paid by insurers to Sesame, who would take a cut and pay on commission on to Mr Watson.
By the time the insurance companies including Scottish Provident, Bright Grey and Bupa Health began to try clawing commission back after he let the policies lapse, Sesame had to pay back £355,421 in relation to fraudulent transactions.
I do admit feeling a bit bad for the guy - though it is hard to disagree that he deserves the punishment meted out. During proceedings the judge told him: “You have lost your job, your reputation and marriage and this plainly is a case which calls for immediate custody.”
The following day, pension investment consultant Chistopher Spackman of Tunbridge Wells was sentenced to 14 months in prison after pleading guilty to two counts each of fraud and forgery, lost £100,000 which he siphoned from a pair of trust funds.
It’s a sad story. The court heard that Mr Spackman’s widowed aunt fell ill leaving him responsible for the two trusts. He decided to take money from the trusts and invest it in an effort to make additional money for the funds.
When the first investment failed he went double-or-nothing to try and make up for the loss, but those investments also failed, supposedly in part due to the pernicious effects of the economic crisis.
In the end the trust fund lost over £100,000 without the widowed aunt even knowing it was happening.
Outside of advice, another jail sentence may yet be handed down to a finance executive at accreditation body the Chartered Institute of Securities and Investment, after he cost his employer £218,000 handing out free verification checks to a favoured firm between 2005 and 2012.
Gerald O’Mara, 52, appeared at the Old Bailey to plead guilty to a single charge of fraud.
While undue commission is at the centre of the ex-Sesame adviser story above, it is also in the crosshairs of the Office of Fair Trading, which yesterday (11 July) voiced concerns that “built-in” adviser commission on defined contribution workplace pensions may not represent value for money.
This seems to be in line with the trend towards pricing transparency that has garnered so many column-inches in the last few months.
Two-tier charging structures, built-in commission and schemes which are unlikely to grow large enough to offer members the kind of value they expect, were all among OFT concerns. All eyes will be on its final conclusions, which are due to be published in August.