Your IndustrySep 14 2018

Fraudsters and ombudsman complaints: the week in news

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Fraudsters and ombudsman complaints: the week in news

This week saw us celebrate - if that's the right word - a decade since the collapse of Lehman Brothers and the start of the financial crisis.

With so much speculation about where the next crash will come from, it seems more likely the markets will make fools out of us. The best thing to do is to read the week in news.

1) Salt in the wound

Just when you thought things couldn't get much worse for the former clients of Active Wealth, who had been advised to transfer out of their British Steel pension scheme, it looks like that's exactly what has happened.

The Financial Conduct Authority (FCA) has warned fraudsters are contacting the firm's former clients, falsely claiming to be from the regulator and offering to help them claim compensation for pension and investment mis-selling by the advice firm, which was involved in the British Steel debacle.

The FCA had been made aware a third party may have provided information about former clients of Active Wealth to another entity.

Active Wealth entered liquidation in February after the firm was told to cease any pension transfer activity by the regulator months earlier.

The firm had advised as many as 300 British Steel pension clients, of which 64 proceeded to transfer out of the British Steel pension scheme into alternative pension arrangements without taking further advice.

2) Banking on Brexit

After the Bank of England's hotly anticipated decision to increase interest rates to 0.75 per cent in August, this month the monetary policy committee decided to stick rather than twist.

Interest rates have remained at 0.75 per cent and forecasts suggest they are unlikely to go up again this year, despite improving economic data.

Until Britain's departure from the European Union becomes much clearer, markets are expecting the Bank of England to stay put at 0.75 per cent.

Bank of England governor Mark Carney has also said the central bank would be powerless to intervene under the worst Brexit scenarios.

Mr Carney warned that under a no-deal Brexit UK house prices could be 35 per cent lower than they would otherwise have been, while GDP would decline and unemployment rise.

The governor said, unlike in the period immediately after both the financial crisis and the referendum vote in 2016, the Bank of England couldn’t cut interest rates to stimulate economic activity.

Instead, he said, interest rates would likely rise in order to prevent sterling falling further.

3) FCA goes public

The FCA's senior management dusted off their tin hats and took to the stage to field questions this week.

The regulator's annual public meeting took place and the FCA's executive team fielded almost two hours of questions.

During the question and answer session, a member of the audience urged the FCA to take action to improve the register to allow the public to find a financial adviser. Jonathan Davidson, executive director of supervision, said he recognised more work was needed to make sure the public could be confident that they were dealing with someone appropriate to help them.

The FCA also reiterated its stance that it will not introduce a longstop for financial advisers.

Christopher Woolard, the FCA's director of strategy and competition, said he empathised with advisers but said the position had not changed.

But Mr Woolard did acknowledge that the issue would probably be reviewed in years to come.

4) Whose side are you on?

The proportion of complaints upheld against the largest adviser firms fell sharply during the first six months of 2018, according to data from the Financial Ombudsman Service (Fos).

St James's Place and Openwork, two of the largest financial advice firms in the country, received 57 and 66 complaints respectively while Sesame, which closed its wealth division in 2015, received 103.

While Sesame saw its number of complaints go up from the last six months of 2017 - from 88 to 103 - the other two companies saw their complaint numbers go down.

But Sesame did see the number of complaints upheld fall dramatically, from 30 per cent in the previous six month period to 12 per cent in the first half of 2018.

Meanwhile, St James's Place saw its proportion of upheld complaints fall from 29 per cent to 15 per cent and Openwork saw this measure fall from 47 per cent to 23 per cent.

5) Should advisers pay more for pension transfers?

Advisers who operate in the defined benefit transfer market should pay more towards the Financial Services Compensation Scheme, according to the safety net's chief executive.

Mark Neale said he was supportive of a risk-based levy, with advisers paying more towards the FSCS if they recommend riskier products and services.

He said it would not be "unreasonable" to expect advisers operating in the defined benefit pension transfer market to pay more, under this system.

The compensation scheme has previously stated it has begun receiving claims caused by bad advice to cash in defined benefit pensions but it has not been able to respond to FTAdviser's requests for figures on this.

Mr Neale said: "I always felt there was a strong case for [a risk-based levy] if you can find a sensible way of doing it.

"We are seeing increasing numbers of claims about trading in defined benefit rights. It seems to me it would not be unreasonable for firms operating in that market to pay a higher levy to reflect that."

damian.fantato@ft.com