Interesting news from the UK here, and some which I often wonder will ever translate over to the United States given the state of the financial services industry?
In essence, what has started to happen is that compensation claims are being made against financial advisors and finance companies, after the mis-selling of SIPPs. A SIPP is a self-invested personal pension, and something that we have our own equivalents of here in the United States.
What the news outlets are saying is quite interesting and goes something like this:
“Shoddy, compromised advice has been widespread in sales of self-invested personal pensions (Sipps), according to the Financial Conduct Authority (FCA), which has sent out repeated alerts this year warning that many investors may have been victim of a mis-sold SIPP plan.
The Financial Ombudsman Service (FOS) also received 1,039 new Sipp complaints in the last financial year, an increase of nearly half on the previous year; the FOS says that in almost two thirds of cases it is finding the business has done something wrong and has been told to put things right for the consumer.”
That’s straight from some of the most well-respected government organisations in the UK and a website called the Money Observer, so should give you some form of indication on what is happening as far as SIPPs claims go – not too dissimilar to how the accident claims and personal injury industry has had to face challenges I am sure you will agree.
What the main problem seems to be is the “self-invested” aspect of SIPPs. This aspect means that it is actally quite easy to mis-sell them, or have them mis-sold to you as an investor. The reason is due to the fact that because investment plans like this have the flexibility to use a wide variety of different investments that fall outside the usual regulations, they can be abused, or mis-managed.
This is very different to standard pension funds plans in the UK, where tight regulation and rules are in place in order to protect people against their losses. Unfortunately many of the people already affected in the UK and England with mis-sold SIPPs have lost their entire life savings. Quite a scary thought I am sure you will agree.
The UK Financial Conduct Authority who regulate the finance industry in England, Wales, Scotland, and Northern Ireland, have published an alert recently where it stated that “serious and ongoing failings” have occurred on behalf of financial advisers whereby they have been negligent and not properly assessed how their clients would suit a SIPP pension product.
Whilst SIPPs give the investor a lot more freedom when compared to a typical pension, they by their nature will be a lot higher risk. In many cases, the person investing will be doing so in off-shore and foreign property investments which are at risk or local laws, and in some extreme cases fraud where the property doesn’t even exist!
In my view, this could be something that could hit the United States soon. I’ve got many friends and old colleagues who have made risky decisions when investing their pension funds, and like the UK SIPP claims that we are now seeing, there’s every chance that they could have been the victim of mis-selling.
Time will only tell.