We have written on this subject a number of times before but still the problem continues.
The Financial Services Compensation Scheme (FSCS) has found four more IFA firms to be in default.
This means that these firms are no longer trading but that the advice they have provided to consumers has resulted in a demonstrable financial loss for those consumers.
The FSCS exists to provide compensation to such people.
In the latest examples these firms have advised their clients to transfer existing pension arrangements into a SIPP and then invested the proceeds in unregulated collective investment schemes (UCIS). We have warned about these types of investments before.
They tend to be high risk and somewhat esoteric but glib salesmen offer the prospect of huge returns and the consumer is taken in by the slick presentations that they are given.
SIPPs are perfectly fine pension products; they typically offer a very wide investment choice. But this can be their Achilles Heel.
The fact that you can invest in a wide choice of investment products and assets does not mean that you have to.
There is a perfectly good choice of regulated products offered by mainstream fund providers as well as all of the direct investments that can be made in stocks and shares or commercial property.
There is rarely if ever any need to go for these unregulated collective schemes and the esoteric investments that underpin them- that should be the preserve of the sophisticated investor not the mainstream investor.
The cost of these defaults will as usual fall on those IFA firms who have guided their clients away from such investment scams.
Once again it will not be the polluter who pays!
