The return of the rogue advisor

port talbot steel workers.jpg

This article first appeared in the Times and is by David Byers. Thanks to David for giving me , Al, Angie and Steve the chance to talk about this important topic

Companies accused of bad practice are starting anew — and the taxpayer is footing the bill

Financial advisers who profited from persuading vulnerable workers to give up secure company pensions are avoiding recriminations by declaring bankruptcy, then setting up new companies, experts say.

Advisers accused of this unethical behaviour, known as “phoenixing”, include those who pocketed hefty commissions after persuading workers at the former British Steel works in Port Talbot to leave their gold-plated pension schemes in 2017. Some workers exchanged their guaranteed pension incomes for risky funds with annual fees of 2 per cent and exit penalties of up to 10 per cent.

Henry Tapper, the founder of Age Wage, a pension rating system, says: “We are in the business of trust, and these advisers are behaving in a fundamentally untrustworthy fashion. It’s unprincipled, immoral, opportunistic and untrustworthy.”

Phoenixing may cost taxpayers millions of pounds a year, yet it is not illegal. When a company authorised by the Financial Conduct Authority, (FCA), the City watchdog, is declared insolvent, the taxpayer-funded Financial Services Compensation Scheme (FSCS) automatically pays any outstanding debt. The adviser behind the business is then free to set up another, often unregulated company out of the gaze of the FCA.

Alastair Rush, a financial adviser providing help to steelworkers, and Angie Brooks, the director of Pension Life, a campaign group, say that phoenixing is a growing problem. Tapper estimates that a dozen companies, whose advisers persuaded steelworkers to move their pensions at Port Talbot, have done it.

“This is a big money-making machine for the advisers and they do not walk away from it — they’re certainly almost all still in business,” Rush says.

One of the best-known phoenixing financial advisers is Darren Reynolds, who was criticised by MPs for advising steelworkers to transfer out thousands of pounds into poorly performing pension schemes.

This month Professional Adviser, an industry magazine, reported that he also persuaded up to 35 Manchester printworkers affiliated to the Trinity Mirror final-salary scheme to transfer into high-risk investments, including an unregulated overseas property scheme.

Reynolds was managing director of the now-defunct financial advisory company Active Wealth in 2017 and was involved in the company Celtic Wealth, which held “sausages and chips” lunches for steelworkers. He is named on FCA records as having previously been involved with Simple Pension Administration, which is going through liquidation proceedings. He is listed as having resigned on December 1, 2016.

The Times was unable to contact Reynolds. However, in a letter to Frank Field, the chairman of the Commons work and pensions committee in February last year, he said that Active Wealth had advised about 300 British Steel pension scheme clients, of which 64 transferred out of their scheme.

“In all cases clients were advised that if their primary aim was to maximise a guaranteed income in retirement, their interests would be best served by remaining in a final-salary pension scheme, such as the BSPS [British Steel Pension Scheme],” he wrote. “However, if the client considered other factors to be a priority, they should consider transferring out into an alternative pension scheme.”

These other priorities included taking advantage of tax-free incentives and having greater control over their retirement savings.

Members of the BSPS were asked to decide what to do with their pensions as part of a restructuring process in 2017. About 8,000 members had transferred out of the scheme by October last year, with transfers collectively worth about £2.8 billion. Concerns were raised and the FCA ordered ten companies to stop their transfer advice service. Rush says: “There’s little doubt many advisers are still operating.”

Steve Webb, a former pensions minister, wants the FCA to get tough. “The analogy I would make is that of a many-headed hydra,” he says. “The public expect these schemes to be dealt with, not just to pop up in another guise and carry on. The regulators are guilty of what I call rear-view regulation — they are too reactive and not procative enough.”

Last year MPs on the Commons work and pensions select committee accused the FCA of “fiddling while Rome burns”. This week they again demanded that the FCA outlaw contingent charging, where a financial adviser is only paid commission if a client goes ahead with a pension transfer. The FCA has rejected calls for a ban.

Tapper says: “We have had a regulator since 1987 and we still have not got a simple way of stopping people in their tracks when they clearly deceive customers. In the US it’s simple — cease and desist. Stop all trading as soon as you are suspended. Here, advisers run rings around the FCA.”

Brooks says: “It’s a little bit like when you were told you were not allowed chewing gum at school. You did it anyway because you knew nothing much would happen to you if you did.”

The FCA has set up an investigatory group involving the FSCS, the Financial Ombudsman Service (FOS), and the Insolvency Service with the aim of “more effectively sharing data and intelligence on individuals and firms”.

In December it warned that financial advisers that phoenixed would lose their FCA accreditation and face a fine.

“We want to make it clear to financial advisers that it is unacceptable for directors to deliberately avoid their liabilities to customers, in particular those resulting from awards made against them by FOS, by closing companies down and starting new ones,” it says.

“All directors are expected to act in a fit and proper manner and to avoid putting consumers at harm. Deliberately walking away from liabilities is not in line with being fit and proper.”

How to avoid a scam

● Check the FCA’s register to find out the history of an adviser. The City watchdog’s list will include any previous sanctions they have faced and roles they have held. If an adviser has “phoenixed” it a warning sign, but doesn’t always mean they have done anything wrong. Their previous company may simply have gone out of business.

● Be wary of investment “opportunities” that come through a cold-call. Cold-calling about pensions is illegal.

● Know who you are dealing with. Your pension is a valuable asset, so don’t hand it over to someone unless their credentials check out.

● Don’t be pressured. Anyone putting a deadline on you should sound an alarm bell.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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5 Responses to The return of the rogue advisor

  1. mosegas says:

    Thanks in advance your articles are reliable source of information and knowledge

  2. DaveC says:

    A fool and their money are easily parted.

    Who introduces the fools to the sharks? The employer?

    • henry tapper says:

      Echoing what Andy says below, people are not foolish to trust pension transfer specialists- especially when PTS are signposted by the Govt (see Rich’s point). People who trust regulated advisers should be protected not called fools.

      To allow many of these advisers to continue practicing after multiple scams (Angie Brooks gives instances) is very foolish indeed.

      In Port Talbot and elsewhere, the employer and trustee were – to a degree – complicit. The workplace was used to generate leads for Reynolds and others.

      But this situation happened because the regulatory framework was not fit for its purpose, to protect those who were approached to transfer without the financial capability to properly understand what was going on.

      Reynolds, Howell and many others are free to carry on working on the fringes of financial services and will no doubt resurface

  3. Please understand that many people have been scammed; and none of them I have spoken to who have been scammed are in any way foolish. The have been tricked by con artists who set out to trick them. Let’s support victims as best as we can; and let’s be decent about it.

  4. RICH says:

    1. The public respect the Government’s advice to seek the help of a regulated financial adviser.

    2. Darren Reynolds was on the register as a ‘regulated adviser’ giving him authorisation and trust from the public, creating a false sense of of security.

    3. What is in question’ is adviser integrity, and I do not believe that Darren Reynolds is an isolated case.

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