Lawrence Miller and Co MD calls for ‘restaurant style’ ratings for financial advisors
You’ll see them in the window of near enough every eating establishment in the country. Black text on a green background. It tells you what the Food Standards Agency thinks of their hygiene. A score of two or below would encourage most people to look elsewhere, no matter how appetising the menu might sound.
Will Harris, managing director of Lawrence Miller & Co, believes that a similar system should be introduced by the Financial Conduct Authority, to reflect the standards of each financial advisory firm.
"A star mark wouldn’t be a comment on the quality of advice, in the same way that the star rating for restaurants is no guarantee of tasty food," Harris explains.
"However, it will give clients, both new and old, a quick and simple 'visual' health check on a particular business. It will also allow them to make a simple, easy to understand, yet informed, judgment on the competence of the firm’s advisers."
The idea came to Mr Harris in the wake of the scandal over the substandard advice given to some British Steel pensioners.
Mr Harris, who wrote an article for this year’s Parliamentary Review, wants the FCA to compensate those pensioners affected, and for the rogue 'advisers' to be prosecuted.
He was so concerned at the time that he decided Lawrence Miller & Co wouldn’t get involved in advising any of the former British Steel employees about what they should do with their pensions.
“Good financial advice is mostly about peace of mind and not the accumulation of wealth,” said Mr Harris.
“They are, in fact, two very different things, as a large number of ex-British Steel workers so tragically found out when they were coerced into transferring out of their company scheme.
“It was all too easy for some 'advisers' to operate under the regulatory radar. While, ironically, a minority of the pensioners did the right thing by transferring out, not one of them can be sure they made the right decision.
"Understandably it’s a very anxious and worrying time for the former employees and their loved ones.”
Concerned that this situation could happen again, Mr Harris believes the FCA should open a network of 20 offices around the UK from where staff can monitor the activities of local firms, and perhaps inspect and issue the restaurant-style ratings.
Nick Smith MP, who represents the former steel making constituency of Blaenau Gwent, came to Mr Harris’ support, commenting:
“The FCA urgently needs to take firmer action on pensions mis-selling and being closer to the communities affected through a network of regional offices would be a good first step.”
He added: “The FCA is still too focused on the City rather than local communities, and as we saw from the British Steel Pension Scheme crisis, this has allowed sharks to slip through the net.
“More transparent information for consumers combined with being more rooted in different parts of the country would at least help with starting to drive the pensions sharks from the waters altogether.”
Mr Harris believes the regional offices would cost no more than £11 million per annum, which is not even two per cent of the FCA’s budget:
“Each time there is a new pension scandal, we are told ‘it will not happen again’ but it does happen again. The FCA doesn’t seem to understand the nature of the problem, relying instead on arms-length and aloof regulation.
“The British Steel Pension Scheme scandal has focused the minds of our sector and we call on the FCA to make grass root changes now, for everyone’s peace of mind."