Firing Line: Caroline Bradley

Firing Line: Caroline Bradley

Financial advisers who have run into trouble over bad investments being accessed through Sipps, have been too "cute" with the rules, according to Caroline Bradley.

Ms Bradley is the group finance and risk director of Tenet Group, but has now taken on the role of group risk and regulatory director at the company. She also runs the company's own professional indemnity insurer, Paragon Insurance, so knows the kind of complaints that come in and has finely tuned instincts over where advisers go wrong.

She said: "It can be a genuine mistake. A lot of funds sound the same. There may be a fund that sounds very similar, and it's been a genuine mistake by a member; sometimes it might be a new member who's not too familiar with the panels and rules, and we're happy to put them on the right track."

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Unfortunately, Tenet, along with every other successful firm, has to pick up the pieces of much more serious mistakes made by other adviser firms when they offer bad advice and the investments go wrong, forcing the Financial Services Compensation Scheme – and the rest of the financial advice industry – to pick up the bill.

Ms Bradley said: "We pay more in our FSCS levy than PI premium for the network."

The reason FSCS levies have gone up is because some advisers are trying to game the system, but the FSCS is onto them, according to Ms Bradley.

She said: "A regulated adviser gives advice to set up the Sipp, and they make an introduction to the unregulated company who then sells an unregulated product. The regulated adviser thinks he's off the hook, but he's not off the hook."

This is because, she said, the whole purpose of the regulated advice was to buy the investment.

She said: "The regulated adviser has tried to be cute with the rules and the FSCS has seen beyond that, and that's why they're paying out the claims and that's why the levies have gone up; a lot of unscrupulous people have sold these products and they're paying high commission."

The investments have subsequently turned out to have gone bad. But, she added, the investor is not entirely blameless because the regulated adviser introduced them to the unregulated adviser, so they ask: "what could possibly go wrong", and are dazzled by the promised spectacular returns.

The FCA is currently exploring new ways of funding the FSCS. Ms Bradley said: "There does seem to be a willingness on the FCA's part to share some of the burden with product providers, because the argument is, why should the good advisers pay for the sins of poor advisers who have gone into liquidation?

"We have been suggesting that a product levy is the way to go and that we should charge more for a high-risk product, and if you're buying an unregulated product you wouldn't pay a levy, and that would help the client realise that they don't have FSCS cover, and they might be more wary of an unregulated product."