Guest comment: The financial mis-selling market in 2020

Sipp provider, Berkeley Burke, has been one of the most high-profile topics in the financial mis-selling market since 2014.

However, 2019 saw Berkeley Burke’s appeal against the Financial Ombudsman Service (FOS) after it lost a judicial review in a High Court ruling in October 2018. The industry - and many claimants - had been eagerly awaiting the outcome of the Berkeley Burke’s latest appeal, which was set to be streamed live online in October 2019, following the initial unsuccessful judicial review.

We had expected Berkeley Burke to go into liquidation before the proceedings began, and just four weeks before the landmark appeal date, the Sipp provider announced its insolvency as it was unable to cover the costs of defending the redress claims made against it.

The FOS’ hands were essentially tied whilst they waited for this landmark appeal date. Now, the shackles have been removed and we expect there will be an influx of further decisions materialising in 2020 as a result.

In 2020, we also expect the court ruling of the Carey Pensions case as a result of the Berkeley Burke appeal cancellation. While we expect the court will rule in favour of the claimant, Mr. Adams, it will also provide more clarity into the law and see future SIPP cases, where an unregulated introducer was used, be bound by the same arguments.

It goes to show that financial advisers, Sipp providers and third parties need to be holding themselves to account and realise that their gung-ho attitude to the British public’s pensions and hard-earned money needs high due diligence at all times.

As we saw with the PPI scandal, we believe that 2020 will be the year that the market finally gets to grips with the toxic end of the Sipp market. Of course, there will still be the mis-selling of Sipps happening, but it won’t be as a result of lack of appropriate due diligence. The general public will become more aware on a similar scale that arose with the PPI deadline.

Due to the increased pressure on the Sipp market, we expect many more Sipp providers will end up exiting the market. We also expect there to be further market consolidation.

A ban on contingent charging is anticipated to come into play this year, and it cannot come soon enough if hard working Brits and their valuable pension pots are to be protected.

Defined Benefit pensions, which are often workplace schemes, are extremely valuable as they offer the recipients a guaranteed, inflation-proof income, year after year.

When pension freedoms were introduced, many DB pension holders were contacted, often via cold call, from advisers offering to switch their pension to a defined contribution scheme, which can be accessed more flexibly from the age of 55.

Unfortunately, many of the DB pension holders that were persuaded to switch did so at tremendous financial risk and would have been better advised to stick with their original policy. Concerns were raised by the FCA after it discovered that an incredible 69 per cent of people were poorly advised. Incredibly, the FCA estimates that the harm created by unsuitable DB transfer advice is up to £2bn each year.

Contingent charging forms part of this story, as this is where a financial adviser only gets paid if a transfer is made. In our opinion, this creates an obvious conflict of interest and could even become the next mis-selling scandal if more Brits decide to pursue claims against firms that wrongly advised them to switch their valuable, secure pension pots to risky or less secure schemes.

If advisers are pushing schemes that are not in the benefit of the pension holder, or not providing the best advice on offer, simply because of the way they are compensated, this creates a huge problem for hard-working Brits who are entitled to feel as secure as possible in their retirement.

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