Go to immediately jail, do not pass go

Panacea comment for Financial Advisers & Paraplanners

7 Jan 2019

Go to immediately jail, do not pass go

On day two of 2019 yet another IFA has been jailed for fraud. Neil Bartlett, 53, of Delamere Road, Ainsdale, used £4.5m of his victims’ money to fund some of the usual, favoured by all fraudsters, indulgencies of foreign travel, top hotels, prostitutes, exotic cars, boats and gambling.

In this case, again, like so many others, it involved investing other people’s money, pensions and often life savings into what they thought was a safe investment account with interest.

By safe, that means it is being paid to the advisory firm to disperse according to the advice plan. But in a not uncommon twist, Bartlett had created a sole trader account with the same name as the company he worked for and paid himself the money.

It is clear that in just about every case of fraud it involves client money being paid to a client account for onward distribution. Ninety-nine times out of one hundred all goes as intended but it is the one time that results in what we see again and again in client money fraud.

Readers may wish to Google search (other search engines are available- in BBC speak) fraud IFA 2018 where the scale of this fiscal disembowelling can be viewed. It is in millions and guess how it is dealt with?

This type of fraud is called, in legal vernacular a ’Serious large-scale confidence fraud’. A common factor is the targeting of known to be vulnerable victims. Also, they will often be multiple frauds, i.e. many victims are deceived in the same way.

As an example, this accusation could be levelled at the victims of the British Steel pension fund debacle.

These offences are usually charged under the Fraud Act where the maximum sentence permitted by law is 10 years imprisonment.

For this adviser’s type of fraud, sentences of up to 7 years are common if the fraud is in excess of £500,000.

For the now ex IFA, the sentence will see early release for being a good ‘boy’.

I am not sure if the FSCS ever try to recover from the now ex IFAs or indeed if asset confiscation is possible to offset some of the redress, but one thing is for sure, no matter what regulation is put in place, what checks are made, the opportunity is still there for this practice to continue.

When I was a broker consultant in the early ‘80’s, some IFA firms, referred to then as brokers, had client accounts’ and operated something I recall as being broker bonds. A bit like a wrap or platform investment in a way but it was in house.

I cannot recall any frauds but there were regulatory concerns and also concern from my employer at the time that this holding of client money where the investment was in an inhouse designed and built vehicle could be subject to abuse.

So, role on and working lifetime and fraud opportunity continues in abundance. The cost to clients when the opportunity is exploited is massive, the cost to the compliant firms is huge too and of course unexpected when the FSCS come calling.

The time has come to put a stop to regulated firms holding client money when the intended destination is to a regulated providers funds, wraps, platforms. As an extra measure, despite all the good arguments put forward by IFAs, regulated firms should NOT be allowed to deal in unregulated activity or markets, this would relieve the burden on PI insurers, FCSC calls and IFA firms when a regulated advice firm advises upon unregulated products. Unregulated products are often just that for a reason.

The ability of consumers to execute instant electronic transfer of funds really renders holding client money an unnecessary and expensive temptation. To stop this would see PI and other regulatory costs reduce and go some way to restoring trust in an industry, sorry, profession, that has taken a battering and will continue to do so every time money ends up in the hands of someone or something it should not.

Just a thought.

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FCA suggests clear out of sales dinosaurs

Panacea comment for Financial Advisers and Paraplanners

29 Oct 2018

FCA suggests clear out of sales dinosaurs

FCA suggests clear out of sales dinosaurs

Arthur’s thought for the day: “You make contact with your customer. Understand their needs. And then flog them something they could well do without.”

I think this may be what one senior figure at the FCA’s perception of financial services sales ‘persons’ is?

David Blunt, head of conduct specialists at the Financial Conduct Authority, speaking at a recent City & Financial conference explained:“Where we want to get to is for firms to have a real sense of personal responsibility for all they do in financial services.

He then went on to say, “Are sales people who have risen to the top the right people to be leading today”? 

As a retired IFA and the founder of IFA community Panacea Adviser, I find his thought process deeply offensive. Is he suggesting that sales people are a sub class. Sounds a bit like the ‘Brexit remainer’ argument about leavers- that they were too stupid, too ignorant, racists, xenophobes……you get the drift.

His Linkedin profile shows him starting his career working for City solicitors Hogan Lovells going on the well-trodden path of articles through to a fully qualified solicitor.

I suspect that David Blunt has little knowledge beyond the walls of regulation and academia. After leaving Hogan Lovells in October 1998, his entire career has been spent in regulation of some sort. Firstly, with a couple of years at the Stock Exchange then from 2000 it has been climbing ever upwards at the FSA and then the FCA.

It was said that intelligence does not fit easily with common sense. The curse of the regulator.

We all agree that happy customers (positive outcomes is the phrase to use in 2018) are the key to any successful business.

But with a working life spent entirely in the world of regulation, I am deeply offended as is the fashion today, on the part of others too, that he should ask the question “ Are sales people who have risen to the top the right people to be leading today”? 

If his Linkedin profile is a yardstick, this is an individual who has no experience of what it takes to raise the money to start a business, especially a regulated business, grow a business, deal with all the troubles that can go with it or has any idea whatsoever about running a business. And amongst the hardest these days is a financial services business.

Sales are bad, sales-people are bad, regulators are good is the message spouting forth? Really?

Any business is built on the fact that it has something that somebody is prepared to pay for. Tangible, or in the world of financial services, intangible.

Any business requires somebody to sell the services, goods, or in the financial services world someone to ‘sell’ the ‘advice proposition’.

Nobody ever bought a financial services product. Historically they were ‘sold’ it, often by direct sales.

That is bad in 2018, it is now by advice.

Bad like the new ’snowflake’ thinking about Churchill, Cecil Rhodes, Bomber Harris or even this month ‘Prince Charming’. All have done bad things it seems. Disney’s ‘Prince Charming’ is probably top of the pile for kissing Snow White without permission.

Back in the day, the reward for the ‘sale’ was described as a commission, successful sales people made a lot of it, the unsuccessful ones fell by the wayside.

By the way, people saved then, paid into pensions, had life cover and did not see advice as something to pay for as it was already included within the sales process- excuse the simplicity, but life was simpler then.

Today, success in sales is not measured in terms of commission, it is now called something else. It is a metric referred to as fee income- based upon advice from a professional. That person being highly qualified with a ‘proposition’ to offer but, with a product invariably attached.  As an aside that will doubtless bring scorn waves raining down, in most cases the fee for the ‘propositions advice proposal’ is closely resembling what was previously known as commission.

A successful advisor is measured in fee income. But really it is still ‘sales’. After all, if an advisor can find no paying clients to give advice to, they fall into the same category as those back in the day, a failure.

Mr Blunt should note that in financial services provider firms there are huge numbers of people who rely on advisors promoting their advice solutions for their livelihoods.

He should also note that most financial advisors are small business owners, if they are sole traders or in partnership, they carry responsibility to the grave at the moment for their actions.

I think that is what is called ‘personal responsibility’.

In any business, the sales people are the driving force yet for some reason, sales in financial services is a dirty word.  Even Hogan Lovells require business getters, people who can get new clients that they can charge fees to.

There are some fantastic people in this industry, many have come from a sales background. I am not sure how many regulatory staff have made the transition to sales in a commercial environment.

Oh, there is one, Rory Percival.

David Blunt “must be on them stair rods” (as Arthur would say), he should be careful what he wishes for.

There may be some out there like me, looking back over the failings of the various regulators we have had- NASDM, FIMBRA, PIA, FSA, FCA, asking Mr Blunt what consumer detriment his actions and those whose actions he manages could be accused of causing. After all, with some 19 years of his working life being spent in Canary Wharf (plus the last couple of weeks in Stratford) and looking with the #metoo generation mindset, there must be something?

But silly me, as ‘Sir Hector’ once said, if you want a regulator to take responsibility for what they do, nobody would want to do the job.

Those in regulation are the one’s who have failed the consumer. They are always right after the event, never show foresight or a willingness to apply forward thinking to regulation.

They kill businesses with that lack of foresight burnished with cost.

It is the consumer who suffers by way of firms passing on those increased costs and charges incurred paying to keep them safe from the detriment the regulator ‘coulda/ shoulda’ spotted years ago.

The question I would ask is “Are people who have risen to the top of the regulatory world with no real-world commercial experience or business success, the right people to be leading regulators today”?  

FCA suggests clear out of sales dinosaurs

FCA suggests clear out of sales dinosaursArthur’s thought for the day: “You make contact with your customer. Understand their needs. And then flog them something they could well do without.”

I think this may be what one senior figure at the FCA’s perception of financial services sales ‘persons’ is?

David Blunt, head of conduct specialists at the Financial Conduct Authority, speaking at a recent City & Financial conference explained:“Where we want to get to is for firms to have a real sense of personal responsibility for all they do in financial services.

He then went on to say, “Are sales people who have risen to the top the right people to be leading today”? 

As a retired IFA and the founder of IFA community Panacea Adviser, I find his thought process deeply offensive. Is he suggesting that sales people are a sub class. Sounds a bit like the ‘Brexit remainer’ argument about leavers- that they were too stupid, too ignorant, racists, xenophobes……you get the drift.

His Linkedin profile shows him starting his career working for City solicitors Hogan Lovells going on the well-trodden path of articles through to a fully qualified solicitor.

I suspect that David Blunt has little knowledge beyond the walls of regulation and academia. After leaving Hogan Lovells in October 1998, his entire career has been spent in regulation of some sort. Firstly, with a couple of years at the Stock Exchange then from 2000 it has been climbing ever upwards at the FSA and then the FCA.

It was said that intelligence does not fit easily with common sense. The curse of the regulator.

We all agree that happy customers (positive outcomes is the phrase to use in 2018) are the key to any successful business.

But with a working life spent entirely in the world of regulation, I am deeply offended as is the fashion today, on the part of others too, that he should ask the question “ Are sales people who have risen to the top the right people to be leading today”? 

If his Linkedin profile is a yardstick, this is an individual who has no experience of what it takes to raise the money to start a business, especially a regulated business, grow a business, deal with all the troubles that can go with it or has any idea whatsoever about running a business. And amongst the hardest these days is a financial services business.

Sales are bad, sales-people are bad, regulators are good is the message spouting forth? Really?

Any business is built on the fact that it has something that somebody is prepared to pay for. Tangible, or in the world of financial services, intangible.

Any business requires somebody to sell the services, goods, or in the financial services world someone to ‘sell’ the ‘advice proposition’.

Nobody ever bought a financial services product. Historically they were ‘sold’ it, often by direct sales.

That is bad in 2018, it is now by advice.

Bad like the new ’snowflake’ thinking about Churchill, Cecil Rhodes, Bomber Harris or even this month ‘Prince Charming’. All have done bad things it seems. Disney’s ‘Prince Charming’ is probably top of the pile for kissing Snow White without permission.

Back in the day, the reward for the ‘sale’ was described as a commission, successful sales people made a lot of it, the unsuccessful ones fell by the wayside.

By the way, people saved then, paid into pensions, had life cover and did not see advice as something to pay for as it was already included within the sales process- excuse the simplicity, but life was simpler then.

Today, success in sales is not measured in terms of commission, it is now called something else. It is a metric referred to as fee income- based upon advice from a professional. That person being highly qualified with a ‘proposition’ to offer but, with a product invariably attached.  As an aside that will doubtless bring scorn waves raining down, in most cases the fee for the ‘propositions advice proposal’ is closely resembling what was previously known as commission.

A successful advisor is measured in fee income. But really it is still ‘sales’. After all, if an advisor can find no paying clients to give advice to, they fall into the same category as those back in the day, a failure.

Mr Blunt should note that in financial services provider firms there are huge numbers of people who rely on advisors promoting their advice solutions for their livelihoods.

He should also note that most financial advisors are small business owners, if they are sole traders or in partnership, they carry responsibility to the grave at the moment for their actions.

I think that is what is called ‘personal responsibility’.

In any business, the sales people are the driving force yet for some reason, sales in financial services is a dirty word.  Even Hogan Lovells require business getters, people who can get new clients that they can charge fees to.

There are some fantastic people in this industry, many have come from a sales background. I am not sure how many regulatory staff have made the transition to sales in a commercial environment.

Oh, there is one, Rory Percival.

David Blunt “must be on them stair rods” (as Arthur would say), he should be careful what he wishes for.

There may be some out there like me, looking back over the failings of the various regulators we have had- NASDM, FIMBRA, PIA, FSA, FCA, asking Mr Blunt what consumer detriment his actions and those whose actions he manages could be accused of causing. After all, with some 19 years of his working life being spent in Canary Wharf (plus the last couple of weeks in Stratford) and looking with the #metoo generation mindset, there must be something?

But silly me, as ‘Sir Hector’ once said, if you want a regulator to take responsibility for what they do, nobody would want to do the job.

Those in regulation are the one’s who have failed the consumer. They are always right after the event, never show foresight or a willingness to apply forward thinking to regulation.

They kill businesses with that lack of foresight burnished with cost.

It is the consumer who suffers by way of firms passing on those increased costs and charges incurred paying to keep them safe from the detriment the regulator ‘coulda/ shoulda’ spotted years ago.

The question I would ask is “Are people who have risen to the top of the regulatory world with no real-world commercial experience or business success, the right people to be leading regulators today”?  

*The brilliant actor who played Arthur Daly was George Edward Cole, who died aged 90 on the 6thAugust 2015

How much is that doggie in the window?

Panacea comment for Financial Advisers and Paraplanners

26 Feb 2018

How much is that doggie in the window?

This HMRC document hit my desk last week. What a great idea, it shows how your ‘hard earned’ is spent by the state on your behalf.

Out of a tax take of £19,302 the welfare spend is more that the amount taken for servicing the national debt, education and defence combined. And they are the 4th, 5th and 6th highest spends.

Welfare accounts in this case for almost 25% of this total tax gathering for 2016/17.

I used to hear a lot about hard pressed families in the lead up to the last couple of elections and I think there was a strong political point to make, but the point set the wrong thought processes off.

If this taxpayer is anything to go by, those hard-pressed families could be in such a situation because 25% of each taxable element of their working day is spent on providing welfare of some sort to recipients various and unknown.

Perhaps in the brave new world of disclosure, this document should give a breakdown subset of how this money is spent, where it is spent, who spends it and on what exactly.

There are some other very interesting perspectives thrown up in this document. The last in particular around the UK contribution to the EU budget. It is just £135, some 0.7% of the total bill.

I was/am very keen to see Brexit actually happen. I doubt it ever will.

But instead of sending buses around the country with messages on the side illustrating how much could be made available to add to the £3,918 from this tax bill on the NHS in the run up to the referendum, voting may have been somewhat different if the amount each taxpayer actually contributed to the EU was set out just like this.

I await another statement for 2017/18 that I assume will show how much has actually been spent from this income tax breakdown on Brexit?

Sadly I fear we will never know.

 

Stinking badges 3

Panacea comment for Financial Advisers and Paraplanners

23 Feb 2018

Stinking badges 3

For those of you who remember the Mel Brooks classic ‘Blazing Saddles,’ the town of Rock Ridge was being held to ransom by out of control Mexican bandits who proudly proclaim to the Mayor, Hedley Lamarr, that in a town with no sheriff, to cause havoc they “don’t need no stinking badges”.

So fast forward to the 21st Century where Rock Ridge is now ‘policed’ by the new bandits in town- Claims Management Companies (CMC’s)

Wheels turn slowly, but those who recall our campaign, with Alan Lakey, on the regulation of CMC’s will note some very positive ‘outcomes’ after a number of meetings with Kevin Rousell, Head of Claims Management Regulation Unit at the Ministry of Justice.

Kevin recently let me know that the House of Commons was working on the FINANCIAL GUIDANCE AND CLAIMS BILL [LORDS] Public Bill Committee: 25 January 2018.

In ‘Blazing Saddles’ parlance, Bart has just ridden into town.

There is an amendment which inserts a provision into the upcoming Privacy and Electronic Communications (EC Directive) Regulations which prohibits live unsolicited telephone calls for the purposes of direct marketing in relation to claims management services except where the person called has given prior consent to receiving such calls.

Do read the whole bill but in particular section N6 which states:

Financial Guidance and Claims Bill-[Lords], continued

After regulation 21 insert—

“21A Calls for direct marketing of claims management services

  1. (1)  A person must not use, or instigate the use of, a public electronic communications service to make unsolicited calls for the purposes of direct marketing in relation to claims management services except in the circumstances referred to in paragraph (2).
  2. (2)  Those circumstances are where the called line is that of a subscriber who has previously notified the caller that for the time being the subscriber consents to such calls being made by, or at the instigation of, the caller on that line.
  3. (3)  A subscriber must not permit the subscriber’s line to be used in contravention of paragraph (1).
  4. (4)  In this regulation, “claims management services” means the following services in relation to the making of a claim—
    1. (a)  advice;
    2. (b)  financial services or assistance;
    3. (c)  acting on behalf of, or representing, a person;
    4. (d)  the referral or introduction of one person to another;
    5. (e)  the making of inquiries.
  5. (5)  In paragraph (4), “claim” means a claim for compensation, restitution, repayment or any other remedy or relief in respect of loss or damage or in respect of an obligation, whether the claim is made or could be made—

(a) by way of legal proceedings,

(b) in accordance with a scheme of regulation (whether voluntary or compulsory), or

(c) in pursuance of a voluntary undertaking.”

Readers may wish to refer to “Stinking badges 2” from August 2016.

It is well documented how claims management companies have plagued this industry in recent years.  Many of these have lied, cheated, deceived and generally operated in a base and underhand manner.

Alan noted “The Ministry of Justice unit at Burton on Trent had been unable to deal with the excesses in a sensible manner and when foul behaviour has been determined the response is often the equivalent of a slapped wrist and a bad telling off. 

Hopefully this bill will sound the death knell at long last for this legally assisted parasite that feeds off the world of financial services.

Stop the shorting monster

Panacea comment for Financial Advisers and Paraplanners

17 Jan 2018

Stop the shorting monster

A short sale is a transaction in which an investor sells borrowed securities in anticipation of a price drop and is required to return an equal number of shares at some point in the future.

A short seller makes money if the stock goes down, a lot of money if it drops a lot.

Shorting is legal. But is it morally acceptable?

This is a question that many outside the financial services industry will be asking, especially when there is such a baying for the blood for directors’failures, political failures, huge salaries being paid for gardening leave and in particular the huge sums of money being owed to small contractors and in fact to Carillion by those it worked for.

Hedge funds have made paper profits of hundreds of millions of dollars over the last year. Shorting of Carillion stock will have done their bit to boost the coffers.

The thirty thousand small firms in Carillion’s supply chain now face an anxious wait to see if they will be eligible for any government help to pay an estimated £1bn of outstanding bills. Many will fail, quite possibly because without the cash they cannot pay their tax bills on the 31st January, but the hedge funds will have no such dilemas

Rudi Klein, chief executive of SEC Group, which represents thousands of small businesses, said it was “inexcusable” that Carillion had “imperiled the supply chain”.

Hedge funds shorting will not have helped.

Conservative MP Bernard Jenkin amazingly came out with that great stock phrase so often used in times of collective failure, on Tuesday’s Channel 4 news, that he would be calling the company’s management, employees and customers as part of a bid to “learn lessons” from this unholy governmental fuelled mess.

What!!!!!

Why not the hedge funds too, who could see only too well that this was coming ages ago?

I think all those small businesses who worked on Carillion contracts that had payment terms of 120 days may think that this is too little too late.

Perhaps now is the time for the FCA to look at shorting and considering banning the practice as shorting just rubs salt into a very large and gaping Carillion wound and will continue to do so when this type of thing happens again, which it will.

Just a thought.

Regulation, competition and consumers

Panacea comment for Financial Advisers and Paraplanners

2 Jan 2018

Regulation, competition and consumers

Please do not get me going so soon in 2018, after all it’s only the first full working week of January

The FCA has released the minutes of its November 9th board meeting. Buried within the text was an interesting section on competition. The minutes noted that:

The Board received the draft Approach to Competition document outlining how the FCA seeks to promote competition in the interests of consumers. It was noted that surveys had shown that competition was the least understood of the FCA’s objectives and so the document would form a useful piece of communication, demonstrating that FCA regulation promotes competition, which is fundamental to making markets work well.

There is something very wrong, very wrong indeed. Could it mean that somebody in Canary Wharf is having a Damascene conversion.

By default or intent, the various regulators over the years I have been active in the industry, from Nasdim, FIMBRA, PIA, FSA and FCA have spent their time in ensuring that the very last thing done is to promote competition. In fact, the very daily act of regulation would seem to be to do the exact opposite.

I think we could look back at many examples of this such as the removal long ago of the maximum commission agreement to RDR, the removal of commissions and a move to fee-based advice.

I had the great fortune to sell my IFA practice 12 years ago, a driver for taking the plunge was that having worked under the ‘control’ of four different regulatory regimes- NASDIM, FIMBRA, PIA and FSA. The prospect of never seeing longevity of regulatory regimes, the application of common sense and fairness all went to paint a very bleak future.

The jury may still be out in that regard, but I think we are at the stage where the judge may be directing the jury that a majority decision would suffice.

I am not normally driven to negativity, cynicism maybe, and while I do see an absolute need to have regulation of financial services, it seems to me that wherever there is regulation, consumer detriment and extreme cost is the outcome with blame being laid at the door of the weakest.

Some key facts to digest:

  • Regulation is poorly thought out in just about every industry
  • It is reactionary rather than pro-active
  • It is not always retrospective, although in financial services it seems to be an exception
  • Nobody ever listens to the voice of experience
  • Nobody ever learns from past failings
  • Nobody in regulation admits failure
  • Nobody in regulation takes the blame
  • Everyone in regulation benefits from yearnings, learnings and earnings
  • Regulatory failure is rewarded not punished
  • Regulation is an industry, it is hermaphroditic, capable of self-procreation and without something to bash it would have no purpose. As Keith Richards (Rolling Stone not PFS) once said “In the business of crime there’s two people involved, and that’s the criminal and the cops. It’s in both their interests to keep crime a business, otherwise they’re both out of a job.”

Regulation should not be pursued at any cost and in such a way, applied like a tattoo only to be regretted when the effect of the alcoholic or love induced stupor that fuelled its creation has gone away.

Has the consumer benefited?

Many may say no.

It would seem that the FCA may be considering that as a distinct possibility

Access to financial advice for the masses has been exterminated. Even if it was freely available in the fiscal sense, there is insufficient capacity to service any more than around 10% of the population based on the recent Heath Report and the FAMR will not correct that imbalance as was intended.

The problem with regulation over the years and as we enter 2018 is that you cannot regulate for lack of common sense, yet that is what we keep trying to do. Caveat emptor has gone at the expense of the consumer rather than in their defence

We have lost the use of that in-built gene of common sense when looking at constructing and applying regulation. Its loss went along with map reading skills, crossing the road after looking both ways, not talking to strangers, proficient cycling, spelling ability, simple mental arithmetic skills, writing, eating with a knife and fork and very many more.

The world has truly gone mad, or at least it has in UKplc’s regulation section.

We have a snowflake society that is now readily and speedily offended on somebody else part for just about everything that simply should not matter as much as it does.

We have borders that are not fit for purpose, we have an NHS in meltdown because the service is now aspiration and expectation based, rather than focusing on the basics of its original 1948 founding principles (comprehensiveness, within available resources) and a country controlled not by UK based elected politicians but by unelected civil servants, quangos, eurocrats and regulators.

To top that we now have ‘Brexit’.

I did say do not get me going so soon!