ProtectionNov 18 2013

Councils blocking advice referrals due to past mis-selling

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ByDonia O’Loughlin

Local authorities are resisting the introduction into new long-term care legislation of a requirement to refer self-funding individuals to regulated financial advisers and are wary of referring to advisers in general due to past mis-selling scandals, according to one national IFA.

Kay Ingram, divisional director of individual savings and investments at national firm LEBC Group, spoke to FTAdviser following a retirement reform meeting last week organised by the Association of British Insurers and attended by local authorities, product providers and specialist adviser firms, including LEBC.

In July, the government rejected an amendment to the care bill that would have forced local authorities to refer people in need of long-term care to regulated financial advisers. Instead of being required to refer to regulated advice, councils need only refer people to advice that is independent of the local authority, which would include charities and other organisations.

Just Retirement and Partnership are both pushing for advice from ‘regulated’ financial advisers to be part of the care bill.

Speaking to FTAdviser, Ms Ingram said her perception from the ABI meeting was that local authorities “seemed wary” of referring those that need long-term care to financial advisers “due to mis-selling scandals of the past”.

Ms Ingram added this “misses the point” and reflects both an “out of date” attitude that ignores the professionalisation of advice and the fact that most of the major mis-selling scandals were primarily centred around bank advisers and bancassurance arms.

In December 2011 a major mis-selling scandal involving HSBC saw it close its specialist long-term care advice arm NHFA Ltd after it was fined a then-record £10.5m over recommendations to invest in asset-backed investment products, typically investment bonds, to fund long-term care costs for elderly customers.

Ms Ingram said: “The proposal for regulated advisers is met with lots of resistance from local authorities. They feel that regulated advisers aren’t the right people to advise this market but they also don’t know who is.

“I don’t think local authorities actually understand or know what a chartered financial planner is. I was disappointed with the reaction of local authorities as I view it out of date and this does not reflect the fact that we have turned our business into a profession.

“This showed to me there is still a lot of work to do. Advisers have a lot of work to do to convince local authorities they are not going to flog a product to their clients and mis-sell them products. Most solutions devised are bespoke and multi-range solutions. There is still a perception that we are salesmen and that [perception] is a reality.”