I remember a recent blog where an adviser had a pop at me for having a go at investment bonds because I said they were often mis-sold.
Naturally he took issue with my hard stance, which I suppose is fair enough. Unfortunately he went to print with basically an acknowledgement that he didn't understand what he had been selling to customers.
I had mentioned that many advisers hid their fees behind a contrived 'extra allocation' rate. This meant they could pop round every five years for their next 8% commission by using the excuse of 're-basing' or changing the underlying asset allocation. For this, cunningly, a new provider was actually better, so, hey-ho, 8% in the bag, see you in five years.
The biggest issue however was the selling of mirror funds. The bonds are often sold on their access to external funds, but they are not external funds at all, they are mirrored versions sold as access to the real thing.
I demonstrated that a customer who bought the real collective was, on average, c36% better off over three years than the customer who bought the mutated mirror version. Why on earth are they still getting away with it?
Amazingly, most advisers that I spoke to thought, and still think, they are accessing the same thing.
Perhaps most surprisingly was the response of the adviser (in print) who told me that he would never use 'internal funds' (quite why they are mentioned when I am talking about mirrored funds, I don't know). To my astonishment he went on to say he used Winterthur and Skandia for his external funds. I nearly choked.
Both only have access to mirror funds and I promptly advised him that he had now told every one in the UK who read the paper that he didn't understand what he had sold his customers. I asked if he was going to write to them but haven't heard back.
I wonder how many other financial advisers are doing the same but I also wonder how many IFAs are missing the trick to move in on bank customers who are being subjected to the above.
Peter McGahan is MD at Worldwide Financial Planning
Putting the tech into protection
Square Mile’s series of informal interviews
Fallout from Haywood suspension
Launching later in 2019
£80bn funds under calculation