The Association of Professional Financial Advisers (APFA) has called on the Financial Conduct Authority (FCA) to tighten the rules around unregulated investments in the name of consumer protection.
The representative body said more needed to be done to prevent consumer losses, especially where there is evidence of a systemic cause. Using pensions as an example, it said retail investors were being sold "inappropriate unregulated investments" held within both SIPP and SASS products.
"The FCA needs to do more as the current system is not working," said APFA director general Chris Hannant (pictured). "A more thorough exploration of the options is needed, with a tightening of the regulatory framework. Scammers are exploiting grey areas in the system to the detriment of consumers.
"Compensating people who have received a bad service, been mis-sold a product or conned should be the last resort. The level of FSCS levies is an indicator of the effectiveness of the regime in protecting consumers - the aim should be to minimise the need for compensation, not just working out who pays for it."
In May, the FCA warned of scammers trying to convince over-55s to invest in unregulated products. A study by the regulator found the most common tactic used by investment fraudsters was unsolicited calls and urged investors to be more cautious when approached by unauthorised firms selling high-risk products.
Alongside its calls for tighter regulation, APFA did welcome the Chancellor's recently laid-out plans to crack down on cold calling in the industry. It said it was "a step in the right direction" but argued the regulation put in place "needs to be reconsidered as it is not sufficiently stringent" to prevent consumers from unregulated products.
Make a difference
APFA also said advisers and their firms can make a difference in protecting consumers. It urged advisers to warn clients about fraudulent investments by ensuring robust controls are in place.
To do this, the body said, advisers need to report any suspected scams to the FCA and also commit to preventing their retail client's funds going into unregulated investments.
Hannant said: "The regulator, the government and advisers should work together to protect consumers from high-risk or fraudulent investments in which they are highly likely to lose their money."
Last week, the Personal Finance Society (PFS) revealed it was teaming up with the FCA to crack down on scammers in a national campaign. PFS chief executive Keith Richards urged members of the professional body to get on board with the campaign and said advisers "have a really key role to play" to protect the public's best interests.
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