The Financial Services Compensation Scheme has said approximately 78 per cent of ifits claims have an element of poor financial advice.
Speaking at FTAdviser’s Financial Advice Forum last week (September 22), FSCS chief executive Caroline Rainbird said bad advice contributes to “a significant amount of damage” that is caused in the industry.
“First and foremost, the vast majority of financial advisers provide a fantastic and really important service to customers and I think that's really important to emphasise,” she said.
“But sadly, there are a number of bad players - deliberately or misinformed - that come into the industry, cause immense damage and ripples across many areas and that’s the type of financial advisers that we see unfortunately.”
Alongside poor financial advice, Rainbird explained that pension advice is particularly a growing area for the FSCS.
“[It’s] extremely complex [and] extremely upsetting for customers who have to come and see us but a growing area of our work is on those complex mentioned claims,” she said.
“Sadly, all of our customers are extremely vulnerable - they've had pretty awful things happen to them and they're worried, frightened, angry, upset and every emotion that you wouldn't want to see in a customer.
“Some have lost their entire pension pot and have very little chance to recover that because the vast majority of the time, they [only] find out there is no pension pot exactly at the time when they need to claim that pension pot.”
In her keynote session, she explained that sometimes clients have been “wrongly labelled” as high net worth individuals by advisers and have ticked that box which indicates they can understand and make the decisions that would be more appropriate for a high net worth individual.
She said 95 per cent of its customers have a salary of £100,000 or less and £100,000 is the definition for high net worth individuals.
“It's fair to say that within that 95 per cent, a significant number of them have a salary much lower than that.
“So we're talking of really vulnerable individuals who try to make an investment in the right way and have been scammed and misled and sadly, in some cases we can compensate that, but in some cases we can't.”
Firms have until July 31, 2023 to implement the Financial Conduct Authority's new consumer duty rules.
The FCA previously said there would be an implementation date of April 30, 2023 but many firms complained this would not be enough time.
However, in a policy statement published in July 27, the FCA announced that companies will have an additional three months for all new and existing products and services that are currently on sale.
The implementation deadline will be extended for a further 12 months (until July 31, 2024) for closed book products to give firms more time to bring these older products, that are no longer on sale, up to the new standards.