PensionsDec 5 2018

Just hang up on the scammers

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Just hang up on the scammers

The common theme with these scams is unregulated investments being sold to unwitting members of the public, often taking their pension funds and investing them through a self-invested personal pension, small self-administered scheme or a qualifying recognised overseas pension scheme.

While the salesmen may be unregulated, as well as the product or investment, there is often a regulated adviser sitting in the background. Indeed, if a final salary pension is involved there almost certainly must be.

Once there is a regulated individual in the chain the client can, and will, complain to the Fos when they realise they have been scammed and the FSCS will pay out. A bill we all ultimately have to bear our share of.

In the main these victims are not greedy; they are mainly financially unsophisticated and easily persuaded to move their pensions by the scammers with the promise of better returns.

In many cases they do not even know their pension will end up invested in unregulated, high risk ‘investments’. They place their trust in the ‘financial adviser’. 

The biggest common factor behind these scams, though, is how the first contact with the victim is made. 

Invariably it is by a cold call.

Closing the loopholes

Finally, after first promising a ban in the Autumn Statement of November 2016, the government has now produced proposals for a ban with the promise they should be brought forward before the end of 2018 and become law shortly afterwards.

The proposals ban any cold call relating to pensions, even if that call is made for another purpose but makes any mention of pensions during the call.

Scammers will not be able to call victims for a ‘lifestyle survey’ and then move the conversation to pensions as part of that call. Potential loophole closed.

There are key, allowable exceptions to the ban – for example where somebody has given express consent to the call.

This does give some concern that a potential victim could see an advert on social media and unwittingly give ‘consent’ to a cold call from that.

Key points

  • The government has put forward proposals for a ban on pension cold-calling.
  • Where somebody has given express consent to the call, this counts as an exception.
  • Marketing calls are allowed where there is an existing relationship with the client.

I am certain the scammers will try to find ways to still contact potential victims and this may well be one of them. If you see dubious adverts on social media, please report them to the Financial Conduct Authority and the provider. I have seen recent evidence of Facebook removing adverts.

Also, marketing calls are allowed where there is an existing relationship with the client.

The relationship can be as the existing adviser or advisory firm, the existing pension provider or scheme administrator.

I think this is an entirely appropriate exception to the legislation. Indeed I would argue that it is not even an exception, because a call where there is an existing relationship is not a ‘cold’ call. 

A cold call would be where there is no existing relationship between the two parties, they do not know each other and the call is not expected. Or, if there is an existing relationship it is for another purpose, so a call relating to pensions is not part of the existing agreement.

Referred communication

One further listed exception will be welcomed by all advisers, I think.

If you receive a referral from another professional, such as a solicitor or accountant, you will be allowed to call that person. Again, I think that is entirely appropriate and was part of my response to the original consultations on the proposed ban.

In these circumstances my argument is that the call is not ‘cold’. The potential client will be expecting your call, the solicitor or accountant will have spoken to them about the referral and given them, at the very least, the name of the firm they are recommending and probably the individual adviser’s name as well.

They will have had to do that if only to gain consent to pass on the number of the client to the adviser to cover data protection. 

Offshore move

We already know scammers have been planning to move their call operations offshore, where they will not be covered by the ban. The call in the UK will still be illegal, yet it will be all but impossible to prosecute anyone unless the call is made on behalf of a UK company.

The message to the public though will now be clear, if you receive a cold call and they ask about pensions, that person is breaking UK law. They are a criminal. The person wanting to speak to you about your pension money is already breaking the law. Just hang up.

That was always the crucial point of the campaign: that simple message to hang up on any cold caller asking about your pension.

Sadly the ban does not cover other types of investments, so scammers will still be able to cold call for those, but I feel the increased awareness will also be effective in cutting this as a source of victims for the scammers.

Thankfully the draft legislation also includes proposals to communicate that message to the public. I think we have already seen increased activity on scam awareness in the past two years with campaigns by the FCA and The Pensions Regulator under Project Bloom.

Many life companies and the Association of British Insurers supported the campaign for the ban, notably Royal London, Aegon and Retirement Advantage (now part of Canada Life) among others. All providers need to help spread the message in their marketing and client communications.

As a profession we can help by spreading the word about scams and the ban at networking groups, in blogs, client newsletters and articles in parish magazines – anything.

Every scam costs us money through the FSCS but more importantly, every scam weakens us as a profession. It does not matter whether the scam involved a regulated adviser or not; it will be reported that a ‘financial adviser’ ripped them off. 

We can all, must all, play our part to combat the scammers and improve the image of our profession. This ban is just one small step in doing that.

Darren Cooke is a chartered financial planner at Red Circle Financial Planning