Morrison Blog: Is trouble coming over the horizon?

Sometimes you spot something a bit left field that makes you wonder about the wider implications and whether trouble is just over the horizon. Someone recently sent me an advert* for some legal training. It was advertising a course scheduled for later in the year entitled "A Masterclass in UCIS Mis-Selling Claims" and has the obvious aim of assisting solicitors with how to litigate in these matters.The introduction to the course is as follows"Following a string of mis-selling scandals, the FCA has now turned its attention to unregulated collective investment schemes (also known as Non-Mainstream Pooled Investments), worth an estimated £2.5billion in the UK. These high risk schemes are often volatile and illiquid and can involve using derivatives to expose clients to exotic assets such as films, fine wines, traded life policies, speculative instruments and property. UCIS fall outside the Financial Services Compensation Scheme, are not authorised by the FCA and are inherently unsuitable for your average man in the street."In the same week there was a headline in one of the main consumer financial magazines "Beware of dodgy Sipp investments" which contained a warning about using unregulated investments and unregulated investment advisers. The example featured was a farmland scheme in Australia promising a guaranteed return of 7% pa.The connection between the two being that many UCIS holdings are in Sipps.I am sure we have all been aware of the high profile failures in this area and hardly a week goes by without a further fund being investigated.{desktop}{/desktop}{mobile}{/mobile}This is also something the FCA has been considering for some time. It was the subject of a warning on 28 April 2014 where the FCA considered Sipps where individuals had been "sold" an investment and then recommended that they put a Sipp "wrapper" around it – the Sipp advisers then attempted to restrict their advice to the Sipp "wrapper" and not the suitability of the "contents".The FCA's conclusion was that "advising on the suitability of a pension transfer or switch cannot reasonably be done without considering both the customer's existing pension arrangement and the underlying investments intended to be held within the Sipp".{desktop}{/desktop}{mobile}{/mobile}Is this the start of a perfect storm? A legal sector that is trained and ready to go and perhaps has some extra capacity as the PPI saga comes to an end?This is even before we get to the pension freedoms and the sales of UCIS outside pensions that I am sure will be generated.The new Sipp capital adequacy regime aims to address this partly by the creation of a standard asset list with everything else by implication being non-standard. Allowing a Sipp to hold non-standard assets creates a greater capital burden than only permitting standard assets. This may help in the Sipp market, but won't help those clients enticed to take money out of their pension to invest.I am also sure that things will get worse before they get better as many of the Sipp investments are historic.There is nothing we like better than a bit of a mis-selling saga!Mike MorrisonHead of Platform Marketing, AJ BellFebruary 2015* Central Law Training advertisement Feb 2015

Morrison Blog: Is trouble coming over the horizon?

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