The Financial Conduct Authority (FCA) has today announced that with effect from 1st January 2014 it will ban the selling of Unregulated Collective Investment Schemes (UCIS) to retail customers.
We are delighted to hear this news.
UCIS products have always been unsuitable for the vast majority of consumers and whilst some of these products are perfectly sound the unfortunate thing is that many were high cost, high risk products and the driver for the adviser was more about commission based rewards than suitability for the consumer.
IFAs who have kept their clients well clear of these often toxic products also end up paying for the product failure.
The Financial Services Compensation Scheme (FSCS) is the protection that UK consumers get when they are badly advised and things go wrong with the adviser no longer able to compensate the victims.
Whilst UCIS are not covered by the FSCS, authorised and regulated advice is, and the costs of such failure to continuing IFAs is massive, often running into millions of pounds.
Our view therefore is it is about time the regulator did this.
Whilst the rules come in from January 2014 it is up to each IFA to determine before then whether they will recommend such a product.
As one of my colleagues tweeted earlier, “If your adviser tries to sell you a UCIS, run a mile!!”
