Archive | May, 2012

FSA Publishes March 2012 PPI Misselling Figures

30 May

The payment protection insurance (PPI) mis-selling scandal has cost financial services £1.375bn so far this year, according to FSA payout figures.

The City watchdog’s monthly PPI refund and compensation figures show an additional £499.5Million claims for March. This brings the overall total to £3.5Billion since the regulator began recording figures January 2011.

The numbers are still rising significantly, from £403.4Million in January 2012 and £472.5Million in February 2012.

 My contact details are :- tel 029 2020 1241, email, twitter welshmoneywiz, linkedin Darren Nathan


Stockbroker Banned For “Reckless Misconduct”

29 May



The FSA has banned managing partner Gearge Leavey of First Colonial Investments LLP for “reckless misconduct”.

The regulator stated Mr Leavey was carrying out a significant influence function without FSA approval, failing to oversee the segregation and protection of client money and approving misleading financial promotions. 

First Colonial Investments LLP was a stock broking firm based in London. The firm provided services through sales advisers/reps who made telephone sales promoting higher risk securities in companies with small cap shares to retail clients. 

Mr Leavey’s responsibilities included the day-to-day running of the stock broking business, the company’s recommendations and sales of shares to clients. He is reported to have failed to register as an approved person, despite carrying out an influence role since its launch in 2006. It was also detailed that he also failed to address unsuitable sales practices by the sales advisers/reps.

The stockbroker received and held client money without having the approvals to do so. The FSA says Leavey, as the managing partner, should have ensured this was segregated from First Colonial Investments LLP’s own money. It is further documented that he failed to do so, and as a result, at least £883,897 of client money was mixed with the firm’s own asset and was used to pay business expenses at First Colonial Investments LLP and its unauthorised sister company.

Mr Leavey has referred the matter to the Upper Tribunal.

FSA acting director of enforcement and financial crime Tracey McDermott says: “Being a managing partner of a firm carries substantial responsibility for ensuring that the firm meets its regulatory responsibilities. We believe George Leavey was reckless in his approach to many aspects of the First Colonial Investments LLP business he was responsible for running.

“The approval of senior managers in authorised firms is a key part of the regulatory framework and a means by which the FSA ensures that authorised firms are properly run and comply with FSA rules. The range of serious regulatory failures in this case shows what can happen when a firm does not have suitable senior managers who are approved by the FSA.”

My contact details are :- tel 029 2020 1241, email, twitter welshmoneywiz, linkedin Darren Nathan

Independent vs Restricted Advice – What’s In A Name?

29 May

Have you worked out if you will be receiving independent financial advice after 1 January 2013? Or has it just dawned on you that in the new financial services landscape post-RDR this might not be the case.

Speaking personally, I will always be an IFA (Independent Financial Adviser) otherwise I cannot see how you can give the very best advice.

Advice For Buying Life Insurance

Restricted Advice, in my opinion, the adviser will have a restricted product range or worse company specific products only – I had hoped the day of sales reps pretending to give advice was behind us, I guess not – at least you will be able to differentiate. I assume this is where the Restricted Adviser will say he gave the best available product. This may be okay but is it good enough?

The current debate is far from resolving itself, the independent vs. restricted argument seems to be gathering pace, and as financial services firms spend the next six months truly focusing on business models and how they might have to change ahead of RDR’s implementation date, it will continue to hold court.

The irony is, the process I have used for many years is the standard now being introduced.

The question you must ask is – Does the classification of advice as independent or restricted really matter to you?



Some believe the term “restricted” has a naturally negative connotation and so advisers and advising companies are expected to dress this up in alternative language. The most common being used where advice is restricted is “Wealth Management”, “Holistic Planner”, “Life Planner” – this is not to say these are the only terms or that these terms are not used by those who are independent. Rather, these are unregulated titles and can be used to dress-up and/or hide the true facts.

Companies offering restricted advice, the most publicised in recent years is St James’s Place Partnership, who offer their products through a direct salesforce. They have argued for the name specialist rather than restricted – what occurred to me is, the advice and products that may be provided does not guarantee specialist advice will be provided.

The point is, whatever you choose, independent will just sound and in my opinion is better.


A Professional Advisers’ Opinion

There are varying estimates from a whole range of sources when it comes to putting a figure on the amount of advisers that will remain independent after RDR is implemented on 1 January 2013.

A common theory seems to be that many advisers will make the transition to restricted to save time, costs, effort and to reflect their qualifications and the services they provide.

The excuse given, due to the level of professionalism, qualifications and expertise needed to maintain independence  many will see  this as just becoming too hard, particularly given the resources it will require.

Is it better to be a professional independent adviser, or a restricted adviser hiding behind titles, such as, ‘specialist’ to camouflage the truth? Well, I can see the benefit to the adviser of “restricted advice” as it offers a more limited service, easier to administer and with fewer choices to the client.

I know which I will be offering, but let me know what you think…

My contact details are :- tel 029 2020 1241, email, twitter welshmoneywiz, linkedin Darren Nathan

Is Free Banking Free?

28 May


Free banking is a 'myth', says UK's top bank regulator

Free banking is “a dangerous myth”, according to Andrew Bailey, who is due to become the chief regulator of the financial services industry. He says customers may think their account is free, but the true costs are actually hidden.

Typically, hidden costs include extremely low-interest rate that many banks offer on current accounts and high overdraft and lending rates.

The reform of retail banking must tackle the issue of “free” in-credit banking. We as consumers need a better understanding of what we pay for and how we are paying.

The banks have self-regulated on this for years but the outcome has not been successful, otherwise this would not be an issue. Ironically, this hidden approach to costings has made it difficult for banks to understand and manage their costs and profit centers. There is a growing school of thought who believe this sales oriented approach where customer benefit is secondary could be a contributing factor to the mis-selling of financial products (currently over £9bn in compensation for mis-selling of loan insurance alone).

It seems that the Financial Services Authority is seriously considering that the regulator or government will actually have to intervene to end the myth of free banking.
Consumer Focus believe there would be real value in establishing a more open and honest relationship between banks and their customers. So that consumers would know the interest they gave up and the costs they incurred and whether others are offering better value for money.

The risk is that banks will take advantage of a change to the system and provide the worst of both worlds – paying for accounts but still enduring unfair charges, opaque and complex products, mis-selling and poor customer service.

Personally, I hope Andrew Bailey will truly act in the best interest of the consumer – and stop the current system of unfairness.


My contact details are :- tel 029 2020 1241, email, twitter welshmoneywiz, linkedin Darren Nathan

Solicitor Struck Off For Referring Clients To A Tied Adviser

28 May

A solicitor has been struck off for failing to refer clients to an Independent Financial Adviser, among other failings highlighted by the Solicitors Regulation Authority.

The Solicitors Regulation Authority brought a case to the Solicitors Disciplinary Tribunal against Andrew Field, of Kent solicitors Field & Co, based on three alleged breaches of the Solicitors Code of Conduct 2007.

It alleged that Field failed to refer his clients to IFAs for investment advice, allowed his independence to be compromised and misled Medway County Court in failing to disclose certain loans from the tied adviser to which he referred his clients, as part of an individual voluntary loan arrangement.

The SRA’s code of conduct states solicitors can only refer clients who need investment advice to independent intermediaries who can advise on investment products from across the whole of the market and offer a fee option.

The SRA started investigating Field & Co in October 2009. The firm ceased trading in October 2010. The SRA’s investigation report highlighted three clients Field had referred to a tied adviser.

The Solicitors Disciplinary Tribunal states the adviser was a partner/appointed representative of a wealth management service. Both the adviser and the firm are not named in the judgment.

The first client had suffered brain damage as a result of a road accident. Field was appointed to deal with the client’s affairs. On the advice given by the tied adviser, Field invested £1.45m out of a total £1.6m in the adviser firm’s unit trust and international investment bond products.

In the second case, Field was acting as joint trustee and executor of an estate that had set aside £300,000 for investment. The adviser recommended the full £300,000 be invested in the firm’s investment bond. In the third case, Field was acting as power of attorney for a woman aged 101. The adviser again recommended the client’s total £300,000 fund should be invested in the firm’s investment bond.

The judgment says, based on Field’s figures, initial commissions would have been more than £43,500 in the case of the first client and £9,000 each for the second and third. Even if the funds made no gains, the annual commission on all three cases would total more than £10,000.

Field received a £25,000 loan from the adviser to which he was referring but no evidence was provided to show he disclosed this to clients. Field failed to disclose the loan as part of an IVA which was agreed in January 2010.

The tribunal found all three allegations were proved beyond reasonable doubt.

It is clear that solicitors are aware of their duty to act in the best interests of their clients and refer to IFAs. This is particularly important after the RDR when advisers may describe themselves as restricted whole of market but are not defined as independent.

My contact details are :- tel 029 2020 1241, email, twitter welshmoneywiz, linkedin Darren Nathan

What’s The Scenario if Greece Exits The Euro & Eurozone?

26 May

Greek Flag

If Greece left the Eurozone, I expect this would be bad for Greece with a hike in inflation, unemployment, panic and social unrest likely.

There are some powerful factions within the Greek political system who are clearly anti the austerity measures imposed. I, as we all, can sympathise to some extent with the plight but there is a limitation as the problem is partly home-grown – where other countries made cut backs and tough decisions in the last decade these where not in Greece.

If Greece can’t satisfy the demands of the European Union and the IMF, then they will cut off Greece’s last remaining lines of credit. Without this, Greece will not be able to pay its bills and could drop out of the euro altogether.

Who should pay for these mistakes? Is there an answer? We can’t change the past and can only deal with the current and plan for the future.


So what is opinion on this :-


Carsten Brzeski, senior economist, ING Belgium

  • Chaos.
  • Greek banks vulnerable from collapse (lack of support if problems arise)
  • Greek companies vulnerable from collapse (lack of support if problems arise)
  • Unemployment would spike
  • Expect the new drachma would drop drastically in value
  • Food and energy prices would leap (poor exchange rates worsen the situation)
  • The turmoil would undermine any opportunity for growth
  • The outlook for the Eurozone would worsen.


Michael Arghyrou, senior economics lecturer, Cardiff Business School

  • The drachma would be devalued (at least 50%), causing inflation
  • Interest rates will double and all mortgages, business loans and other borrowing will become much more expensive.
  • There will be no credit for Greek banks or the Greek state.
  • Expected shortage of basic commodities, like oil or medicine or even foodstuffs.
  • A lot of Greek firms rely on foreign suppliers, who may cut off Greek customers.
  • Greek companies could be driven out of business.
  • Greece will lose its only reference point of stability, which was its euro status.
  • The country would end up in a volatile period.
  • There would be institutional weakness.
  • The worst case scenario would be a social and economic breakdown, perhaps even leading to a totalitarian regime.


Sony Kapoor, managing director of the Re-Define think tank

  • Greeks or European policy makers talking about an exit in a casual blase way are being highly, highly irresponsible.
  • Total cost versus the total benefit remains overwhelmingly negative, both for the Eurozone and Greece.
  • A Greek exit could undo a large part of good work in Ireland and Portugal.
  • If you are a Portuguese saver with money in the bank, even if there is a small likelihood of losing that money, it would make perfect sense to move euro deposits while you can to a safer haven, like the Netherlands and Germany.
  • There would be a significant deposit flight in peripheral countries.
  • It would immediately weigh on investment in the real economy, because corporations would be very reluctant to invest anything at all.


Megan Greene, director of European economics at Roubini Global Economics

  • Cascading bank defaults in Greece would be expected
  • Everybody would take money out of Portuguese and Spanish banks.
  • A big part could be plugged by the European Central Bank (ECB) through a liquidity operation that would backstop the banks. The ECB has already done that several times and it would step up to the plate again.
  • Political contagion or unrest.
  • Greece is a small country and the rest of the Eurozone has been making provision for this for a long time now.
  • The Eurozone could survive a Greek exit.
  • The exit could be better for everyone involved if managed in a co-ordinated orderly way. 
  • If a unilateral default, an exit would be a worse option for Greece.


Jan Randolph, head of sovereign risk, IHS Global Insight

  • If credit is withdrawn by the EU and IMF, then Greece becomes a cash economy. It means the government can only pay what it collects.
  • The government starts shutting down, 10-15% of state employees don’t get paid and unemployment surges from 20% to 30%.
  • But Greece can still use the euro.
  • It would be difficult for the ECB to keep banks afloat.
  • The Greek banking sector would collapse.
  • More unemployment, as credit for companies would dry up.
  • What happens next is a political question.
  • European nations would probably not accept another Western European country descending into chaos and collapse.
  • The EU and IMF would probably negotiate some kind of aid.
  • Greece could continue with the euro.


 My contact details are :- tel 029 2020 1241, email, twitter welshmoneywiz, linkedin Darren Nathan


Greece and a Change to the Eurozone?

24 May
So with the Greek election (take 2) looming only weeks away, the questions is – will Greece remain in the Eurozone? Personally, I believe if they left it would be both political and financial suicide but that is just an opinion. For the Eurozone such an option is unthinkable and hugely damaging – let alone the fear of the domino effect (so who would be next) and I guess that would/could lead to the end of the Eurozone.
Drachma may become legal tender in Greece again
It seems clear that there is growing support for the opinion that the current strategies for resolving the Eurozone Debt Crisis are doomed to failure. The most likely scenarios are :-
  • a Greek exit, or 
  • a rapid shift to a fiscal union.
If Greece is anything to go by, the current approach of forcing austerity on crisis economies and preserving their membership of the euro leads to dissent by the voting population. If we look at the voters behavioural changes, this seems to have led sentiment towards more extreme parties, both on the left and on the right.
In recent opinion polls, the majority of Greek voters (in excess of 75%) want to remain in the Eurozone (but also reject the austerity programme). The issue being, if there is a change/relaxation of the agreed commitments would send a destructive message to all other member states who are part of austerity programmes. This could lead to financial markets losing confidence, outflows of funds from Greece and other associated economies would accelerate, yields on financial instruments would sore. If this was the case it would be realistic to see the Euro could unravel and collapse.
A Greek Exit
A Greek default and exit from the Euro could have dire knock-on effects possibly leading to similar financial disasters in Spain and Italy. To prevent this contagion would require the ECB to lend several trillion euros to banks, and the available funds in this scenario are unlikely to be sufficient to cope with the fallout.
A Rapid Shift to Fiscal Union
This is expected to avoid the risk of contagion and financial collapse in at least some of the peripheral nations. This would require a substantial move towards a more centralised or federal style control of Eurozone government revenues and expenditures. This includes the concept currently being negotiated of Eurozone government issued bonds on behalf of all member states collectively.
If Brussels were to take over the debts of Greece and other struggling peripherals the immediate credit crisis would recede and the Eurozone credit would establish itself alongside US Treasury debt as one of the foremost debt markets in the world.
The outcome is stability but the unknown – is at what cost, both short and long-term?
This is in direct comparison of the current situation, where the current approach has led to  the Eurozone capitulation to the need to bail out Greece, Ireland and Portugal has undermined the monetary union, and the risk of contagion to Spain and Italy now threatens its very existence.
My contact details are :- rel 029 2020 1241, email, twitter welshmoneywiz, linkedin Darren Nathan