As the last of the children head back to school it appears the financial industry has also behaving as if it is in the playground. Here is the week in news...
All sorts of name calling, and fights have broken out this week in adviser land.
1) Peter Hargreaves on how to win friends and influence people
The week started off with billionaire Hargreaves Lansdown founder Peter Hargreaves accusing equity income investors of being “too overweight”.
But before you start frantically typing a letter of complaint – what he was actually criticizing was advisers' and investors' reliance on equity income.
He labelled them as "misguided", and claimed that fund managers, which once dominated the sector, have begun to underperform.
He said that since the bursting of the dotcom bubble in 2001, "investors, advisers, everyone has thought that equity income shares are the only place to be.
"Everyone has been overweight equity income funds and shares.”
2) Finger pointing over two year fixed frenzy
The name calling continued when mortgage network JLM Mortgage Services criticised advisers who focus on two-year ‘cash-cow’ deals.
It said the move is against the best interests of clients.
JLM Mortgage Services, which has 43 advisers across seven firms, said that with the UK’s exit from the EU set for 2019, advisers and organisations that are heavily promoting such short-term deals are therefore effectively dropping their clients into an uncertain environment when their rate ends in two years’ time.
It alleged that while lenders are responding to customer demand by offering three to five-year deals, a large proportion of advisers continue to push two-year deals with high fees that may not be in the best interests of clients.
3) The one with the Sipp and the CMC
Classrooms up and down the country may have been full of conker fights – but the real battle happened when a claims management company and a self-invested personal pension provider found themselves in a war of words over a "miss-sold" investment.
It emerged that Ethical Forestry Ltd is currently being investigated by the Serious Fraud Office and according to Companies House is in liquidation.
Chris McCabe, group associate director at claims management company First Target Recoveries, said 872 clients who had invested in the company had been referred to it by the insolvency practitioner.
He said the majority of the clients he is dealing with held the investment with Liberty Sipp. But the provider has hit back at this claim, saying it is the victim of an "aggressive and sustained" misinformation campaign.
Liberty Sipp has claimed this misinformation campaign has led to investors becoming concerned about their investment, which it says it did sufficient due diligence on.
4) FCA targets investment consultants
As with all schools, there is always a formidable head teacher keeping an eye on naughty pupils.
This role seems to have been given to The Financial Conduct Authority, which has asked the Competition and Markets Authority to investigate competition levels in the investment consultancy and fiduciary management sectors.
The City watchdog said it has the power to investigate when it suspects competition levels are “prevented, restricted or distorted”.
It said in the investment management and fiduciary services markets it believes the markets have been distorted in three ways.
The organisation said competition is not particularly being driven by customers of these services, with pension trustees “relying heavily on investment consultants but having limited ability to assess the quality of their advice or compare services”, with this leading to low switching rates.
5) Regulator warns over bitcoin boom
The Financial Conduct Authority wielded its head teacher-like power when it raised concerns about virtual currencies such as Bitcoin. In fact, it said that investors should be prepared to lose all their money.
The FCA said the digital token may represent a share in a firm, a prepayment voucher for future services or it may have no discernible value at all.
In its warning, the FCA said initial coin offerings are “very high-risk, speculative investments”.
It added: “You should be conscious of the risks involved … and fully research the specific project if you are thinking about buying digital tokens.
“You should only invest in an ICO project if you are an experienced investor, confident in the quality of the ICO project itself (e.g. business plan, technology, people involved) and prepared to lose your entire stake.”
