At some point someone must have explained to me how an APR worked, or about investment charges, or even how pension tax relief is calculated.
For the life of me, I couldn’t tell you when all these things happened. They’re some of those bits of knowledge you just seem to acquire over time. But I can remember the day, and my utter incredulity, when someone explained to me about ‘phoenix’ firms.
“Hang on, while I get this straight,” I remember saying while rubbing my eyes.
“So a business can shut down, walk away from any claims a consumer has against it, and then start up again almost the next day and do almost exactly the same thing using almost exactly the same business name? And they can even do it from the same building they worked in before?”
It’s flabbergasting. Of course, the practice is not just limited to financial advisers.
I also realise that director liability has been a core part of corporate law for more than 100 years, but that doesn’t mean it is not utterly distasteful and should come to an end.
It’s damaging for the reputation of the industry and utterly harmful to consumers – particularly when it involves financial advisers who trade seemingly with no scruples as to the harm they do to their clients.
It doesn’t need an overhaul of business regulations for more to be done to clean up the industry and stop the sharks who create a trail of phoenix companies. The power lies in the hands of the City regulator, the Financial Conduct Authority, and its register of approved persons.
How to check the credibility and reputation of a financial adviser has always been one of the great challenges of seeking advice. And more specifically, how to spot the rotten apples that taint the rest of the crop.
I’ve always thought looking at the FCA register or asking for qualifications was a largely meaningless process.
Recommendations from friends and family also only go so far: what’s good for the goose isn’t necessarily good for the gander – particularly if the goose is already being misled or mis-sold and doesn’t know anything about it.
What has always baffled me is how hard it is as a consumer to see the track record of an individual adviser. A certificate tells you they know their stuff, but what I really want to know is whether they are honest.
The individual complaints record of an adviser should stay with them forever – or at least for a reasonable period of time.
It means that the work of a rogue adviser can hang around the neck of one business, while the adviser can move on elsewhere and continue their dirty work (presumably, to taint the track record of another firm).
Then the Financial Services Compensation Service will hand out cash to those left out of pocket, leaving everyone else who hasn’t misbehaved to pick up the tab.