Article by Phil
More work on Financial Planning scam warnings
The Financial Conduct Authority (FCA) continues to work to reduce the impact of Financial Planning scams and online fraud.
It has now launched a first of its kind advert which is being played in cinemas throughout the UK. The advert is specifically designed to play to cinema audiences in a trailer format. Part of the FCA’s very helpful Investsmart strategy, the advert shows how online fraudsters use social media to whip up false hype about Financial Planning scam investments. The strap line is “Don’t get played”.
Hopefully this will help in the push for awareness, especially online.
The FCA has also published some information from its review of advertising for high-risk investment products. New rules were introduced in August last year and the FCA been looking at the results.
One of the first measures put in place was to ban financial incentives for investments. Things like introducer bonuses or joining incentives. These seem to have been taken on board and the FCA found little evidence of incentives in most of the advertising anymore.
The next measure was increased prominence of Financial Planning risk warnings. The FCA found that this was not being dealt with as clearly as they had hoped in some cases. Warnings were still being hidden in the small print or on click through pages away from the main marketing messages. Warnings were not as personalised as they could be either. More work needs to be done by firms on this area.
Finally cooling off periods had been recommended and required for crypto products for example. Where they had been introduced explanations were mostly clear and the processes robust. But not in every case.
The FCA’s report included further guidance on what good practice should look like and the FCA warned firms that they would take action over non-compliance.
Further progress on pension scams has been made with a 7% reduction in the number of warnings about final salary transfers. The XPS transfer warnings were introduced three years ago. But the overall number of transfers has fallen over the last 12 months. One reasons for a reduction in Financial Planning scam warnings may be the increase in annuity purchases given the increase in interest rates. If a pension is transferred to buy an annuity there would be no scam warning.
The FCA has also been taking tough action on financial crime. It opened over 600 investigations last year up by 65%. In addition, it imposed a fine of over £200 million on Nat West Bank for failing to conduct proper money laundering checks when a Midlands branch was found to have accepted bin liners full of over £700,000 in cash.
Away from scams, the Chartered Institute for Savings and Investment (CISI) warned that financial advisers were on the front line in the fight against financial abuse.
Financial abuse is defined as controlling a person’s finances, stealing money or coercing someone into debt. It is now recognised as a crime under the 2021 Domestic Abuse Act.
Advisers are at the forefront because they are one of the few people who naturally talk to clients about their finances. That puts them in a position to judge whether one of the parties is potentially being subjected to coercion. Although what should they do?
The advice from the CISI is to sign post clients to helpful resources, including legal advice. It is not recommended that advisers involve the police as this could make the situation worse.
