Financial Conduct Authority analysis shows that a third of all Financial Services Compensation Scheme claims over the three years to 2016 were linked to the sales of non-mainstream pooled investments by regulated advisers.
Based on this it will be asking advisers how many esoteric investments they have recommended.
I was somewhat surprised that it does not already do this. Surely such questions should be central to understanding the risks the advisers are suggesting clients take with their money? Looking at the history of investment advice that has gone wrong over the past 30 years there is a consistent factor.
The more esoteric the product, the less likely the investor, and arguably their adviser, is to understand it and the more likely it will all end in tears.
We can start with endowments – so simple on the surface; so complex under the bonnet.
The more esoteric the product, the less likely the investor is to understand it But that was nothing compared with the precipice bonds that Lloyds Bank foisted on high street customers merely looking, who made the mistake of building up a decent balance in their savings account.
David Aaron Partnership was equally seduced by the precipice bond that was aggressively marketed to investors. The firm was declared to be in default in December 2004.
Huge credit for exposing this must go to my former colleagues at Money Mail – Charlotte Beugge and James Hopegood – who persevered in their belief that something was amiss at this firm while many other journalists turned a blind eye and enjoyed the smart lunches.
Whitechurch Investment Services was declared in default on January 19, 2005, with claimants for precipice bonds being sent to the FSCS.
Norwich & Peterborough flagged its IFA network, then stuck farmers from the fens into bonds than invested in US life insurance policies.
Onward to Barclays Bank, which plunged cautious investors – many of them elderly – into funds which, among other things, were speculating on non-investment grade convertible bonds. That led to a £7.7m fine on Barclays in 2011.
The fairly obvious conclusion is that investing must be handled with care and that esoteric investments must be treated with extreme caution.
And if advisers have a penchant for using them, then they should be prepared to explain why.
Shameful record on complaints
Alliance Trust Savings’ record of almost 22 complaints per 1,000 client accounts on investments and 33 per 1,000 on pensions and decumulation is shamefully bad.
I recently helped a reader who wrote to me on September 6 pleading for help after trying to transfer his Isa “for more than three months with no signs at all of any progress in sight”.
He told me: “I have raised a complaint on this, which was upheld by ATS, but no action to improve the situation was taken, no apology offered and no compensation offered for the stress and distress caused or the cost of phone calls.”
A good part of the problem in this case centred on a failure to agree trade and settlement dates and was down to Alliance Trust’s insistence on dealing by email.
Hargreaves Lansdown, which would be receiving the Isa, sent four emails suggesting dates and then chasing.
Alliance Trust for its part admitted it “could have done more to speed up the process”. It eventually waived the transfer administration fee and paid £200 compensation.
I too found dealing with ATS enormously frustrating. How many large organisations have no obvious media contact details on their website?
How many would fail to find anyone to return a call to a journalist who left three messages over two days? Arrogant, out of touch or a total mess? You take your pick.
My correspondent summed up: “I will be relieved to be rid of ATS as I feel the way I have been treated is disgraceful. Should you investigate this case and publish it would be satisfying to think that others would be disinclined to deal with this company and avoid the agony I've been going through.”
Home improving worse than moving
I notice that HMRC is reporting a stagnant housing market.
As someone who has decided to improve rather than move I can assure you that moving is much less hassle. Yes, you have to deal with estate agent and solicitors. You have to pack up your home and start again.
But you do not have drills and banging for weeks on end. You may have to pay stamp duty, but you save thousands on biscuits, tea bags and sugar.
And with any luck the survey on your home will not discover the rotten joists under the kitchen floor, which have just sent our costs into orbit and completion into the infinite future.
Tony Hazell writes for the Daily Mail's Money Mail section
