Gould, a former economist, said all firms taking a cut of the fee from a client, including product providers and trust companies have a responsibility to make sure that the money sitting inside their wrappers is not being ploughed into investment scams.
“If we [the financial services industry] are taking a fee and we are facilitating investment, we ought to have a responsibility to find out about the investment, this includes the product provider and trust companies,” he told an audience of advisers at International Adviser’s International Portfolio Bond Forum in Bristol on Wednesday.
FCA pension transfers warning
The comments were in response to a stark warning issued by the UK’s Financial Conduct Authority (FCA) last month, which set out guidelines for firms advising on domestic and international pension transfers after reports that some clients are being defrauded or their funds transferred into unsuitable investments.
On Thursday, the regulator revealed that more than one in 10 consumers contacting the FCA do so to report a financial scam and to find out what they can do about it.
Gould added that advisers conducting execution-only business on behalf of clients must also scrutinise such investments.
“The advisers need to take responsibility and not just let the execution-only decision go through the system unhindered,” he said during a panel debate.
Markas Gilmartin, founding partner of Epoch Wealth Management, also based in Bristol, agreed with Gould, saying: “There needs to be shared culpability on all levels, it can’t just be down to the introducer [of the scams].”
Improved due dilligence
Meanwhile, Steve Kevan, managing director of the recently-formed international unit of discretionary fund manager Rowan Dartington, said that some international providers of recognised overseas pension schemes (Rops) already exercise due diligence when it comes to investments in their wrappers.
“There are certain Rops providers out there who will not accept business unless it has a regulated discretionary manager.
“They are doing that because many of the advisers picking the funds, particularly in the offshore community, are still receiving commission payments and trail payments. So some of those Rops providers are waking up to their responsibilities, in ensuring that that money is being invested appropriately,” he said.
However, Nick McBreen, a Cornwall-based IFA with Worldwide Financial Planning, said more onus should be on the end investor to “look at what they’re being offered”.
“We need clarity from providers but actually investors need to understand that ‘If it quacks like a duck, walks like a duck and looks like a duck” it probably is.
“I want investors to take a harder view on people who promise to change their financial world overnight and say to them ‘you know what, I don’t think so’,” he said.