IFAs have hit back at Treasury Committee claims that advice given to clients with money deposited with Icelandic banks in the run-up to their collapse in October was not good quality.
In its report into the impact of the Icelandic bank collapse, the Treasury Committee says: "Bearing in mind the heavy coverage in the financial press of Iceland's fragility we would have expected offshore savers using independent financial advisers to have been advised of the changing risk profile of their savings."
It also announced plans to probe the role of advice to customers in its forthcoming enquiry into the banking crisis.
However, advisers have reacted angrily to the Treasury blaming them for the crisis.
John Boyle, director of Chartwell Financial Management, says: "The failure of Kaupthing Singer & Friedlander Isle of Man (KSFIOM) was extraordinary due to the unprecedented intervention of the UK government and the lack of communication between the UK regulator and its Isle of Man counterpart, as the report makes clear. No amount of credit analysis could have anticipated this."
Rod Leonard, managing director of Cheshire Trafford UK, questions why the FSA did not warn advisers and savers with the banks of their changing risk profiles.
"The FSA does everything in hindsight. We've got a regulator that does nothing but then has a go at small IFAs. One of the heads of retail at the FSA previously said people should be suing IFAs if they had been organising their savings offshore. That's ridiculous."
He believes information about the ailing banks ahead of their collapse was unclear at the time. "But as an IFA, you look carefully at those companies with high interest rates as they are trying to pull money in," says Leonard.
The first report in a series on the Banking Crisis considers the case for assistance by the UK Government to UK citizens who deposited money in the offshore subsidiaries of the Icelandic banks, as well as for local authorities and charities.
It says the UK Government cannot provide cover for deposits held by British citizens in jurisdictions outside the direct control of the UK. However, the committee acknowledges the "severe distress" caused to depositors, many of whom are British citizens.
UK authorities should seek to work closely with other interested parties such as the Financial Services Commission of the Isle of Man to maximise transparency of the administration of Kaupthing Singer & Friedlander (KSF) UK to get the best outcome for depositors including those with funds in KSFIOM, the report concludes.
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Entry deadline: Friday 28 September 2018
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