RegulationJul 28 2016

FCA unregulated product review sparks property concern

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FCA unregulated product review sparks property concern
Aidan Crawley/Bloomberg

Providers of self-invested personal pensions have said the Financial Conduct Authority needs to be careful not to crack down on the wrong sort of unregulated investments.

Last week the regulator confirmed it is looking into the issue of regulated providers offering unregulated products.

The regulator confirmed it was looking into the issue after complaints commissioner Antony Townsend said regulated providers offering unregulated products often caused confusion for investors.

Mr Townsend pointed out some investors think using regulated companies means they are automatically covered by the Financial Ombudsman and the Financial Services Compensation Scheme.

In response, the regulator said it is considering whether there is more it can do to help consumers grasp that just because the provider is regulated does not mean unregulated products they offer are covered by Fos or the FSCS.

Martin Tilley, director of technical services at Dentons, said any changes the FCA could make to rules regarding this issue would have to take Sipp investments into account; particularly commercial property.

He said: “You will go to an IFA with a problem they will solve for you and in that instance they are saying you can have commercial property in a Sipp or Ssas, but cannot select the property for you.

“Advisers are not surveyors and they cannot be experts in property valuation. My concern is the regulator will say you cannot set up a Sipp unless you are prepared to put your neck on the line for the commercial property.

“The regulator has got to be careful about how it differentiates between the perfectly legitimate unregulated assets and the ones which are truly rubbish.”

Robert Graves, head of pensions technical services at Rowanmoor, said some unregulated products like commercial property are perfectly legitimate in the right scenario.

“We send out appropriate risk warning letters for any unregulated products and make it clear they are not covered by the FSCS, but we are not responsible for the appropriateness and that is where we work with advisers,” he pointed out.

In his annual report, the complaints commissioner questioned whether the FCA’s conduct of business rules are strong enough to tackle this issue and urged the regulator to review them.

Mr Townsend said consumers often thought the FCA should take action against a regulated company, but the regulator’s position was that the complainant had purchased an unregulated product and there was insufficient evidence of serious misconduct to justify its intervention.

Chris Hannant, director general of the Association of Professional Financial Advisers, said the industry should be making it impossible, or at least very difficult, for retail investors to get anywhere near some of these investments.

He said: “Potentially the high net-worth rules need to be tightened up and there is the slightly murky world of the introducer, which needs to be looked at but I think there is a role for advisers to play.

“While we would like to see the FCA take action, we are looking at what we can do ourselves.”