Financial regulators are warning investors about the risks of geared traded endowment policies (GTEPs) after a £100,000 misselling fine was upheld against an IFA firm.
The Financial Conduct Authority fined Westwood Independent Financial Planners for failing to communicate the risks of GTEPs clearly and for selling unsuitable investments to customers.
The firm appealed to the Upper Tribunal, which upheld the fine.
The tribunal heard that in several cases, Westwood advised clients to remortgage their homes to raise the cash to invest in a GTEP.
Since then, most of the policies sold by the firm have slumped in value, although most have many years to run to maturity.
The company earned almost £510,000 in commission for selling 50 GTEPs.
However, the tribunal heard from unsatisfied customers that the firm’s advisors failed to provide information about how GTEPs worked in a clear and fair manner.
Unsophisticated investors
Two customers, a teacher married to a freelance writer, took out a larger mortgage than they needed to finance a new home so they could buy into a GTEP on the advice of the firm.
“These were unsophisticated investors with little or no understanding of the risks of GTEPS,” said the tribunal. “The information they were given was weighted towards the positive with little emphasis or explanation of the risks.
“Although not misleading, it was not clear and fair.”
The tribunal heard that some of the firm’s clients had already been paid compensation.
Westwood no longer advises on regulated financial services and is in sequestration – the Scottish form of bankruptcy.
“Investors should make sure they fully understand the investment they are buying into and the risk involved,” said an FCA spokesman.
Warnings about bogus advisers
The FCA has also issued these warnings about bogus firms posing as regulated financial advisers:
- FCP Insurance Consultants Limited
- Next Financial Network
- DeVere Group UK (clone firm)
- Estlander & Ronnlund Capital Management (clone firm)
Dealing with an unregulated firm
If you buy shares, save money or invest with an unregulated firm, you lose any protection offered by the Financial Ombudsman and the Financial Services Compensation Scheme. Broadly, you have no independent place to complain if the deal goes wrong and are unlikely to win any compensation.
Checking if a firm is regulated
Go to the Financial Services Register to check if a firm is regulated in the UK.
Reporting a suspected bogus adviser
Find out how to report unauthorised advisers on the FCA web site
