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PFS calls for action on unregulated advice ‘grey area’

PFS calls for action on unregulated advice ‘grey area’

Personal Finance Society chief executive Keith Richards has called on government to act in eliminating a “grey area” that poses a threat to consumers by bringing all advice, including on ‘unregulated’ investments, under one ‘regulatory umbrella’.

The professional body’s chief executive called for greater control of non-regulated savings and investment activity, reiterating warnings made at the end of last year.

He said the problem has become all the more immediate in the wake of April’s at-retirement reforms, in relation to which many in the industry have expressed concern that scammers will take advantage of the freedoms given to consumers to move money freely from their pension.

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Mr Richards stated that the increasing danger of consumers finding their way into unregulated activity is worrying, adding: “It is now time for all activity to come under the same umbrella, to provide consistency of standards and consumer protection”.

He added the public do not generally understand the difference between regulated and unregulated activities, logically assuming that it is all covered by appropriate supervision. Currently, ‘advisers’ that do not act in relation to regulated investments do not themselves need to be regulated.

“It is in everyone’s interest to regain public confidence in the financial services sector. Accordingly, we are calling on the government to play their part in bringing about change, to both better serve the public and encourage a shift back to a savings culture.”

Mr Richards suggested that it is also time to undertake a broader review of regulation to ensure that it does not drive firms to develop non-regulated solutions to avoid regulatory cost and risk. It comes in the wake of waves of complaints over regulatory fees in recent months.

“The advice profession continues to make good progress since RDR and it would be disastrous to see that undermined when reforms offer a unique and positive opportunity for greater consumer engagement,” he asserted.

“Now seems the perfect time to create a level playing field and avoid the danger of poor consumer outcomes arising in the future.”

Gareth Roberts, partner and head of advice at wealth manager Greyfriars Asset Management, stated that since pension freedom day, they have seen related enquiries rise by up to 50 per cent.

“The industry warned savers to be calm, the FCA and Pension Wise urged caution, and yet every day rash choices, a failure to explore options and uninformed decisions are resulting in serious harm.

“Tragically for too many, once the decision has been made, it is too late to go back and life savings are gone, or locked into products that are simply unsuitable.”

Two months ago, the FCA launched the next wave of its ScamSmart campaign, aimed at preventing people from investing in “dodgy investment scams” made easier by next month’s at-retirement reforms.

The campaign highlights that would-be investors should reject any cold calls, check their approved warning list and get impartial advice

peter.walker@ft.com