Tag: Structured Notes

  • Pension Scams Explained – Stage 2

    Pension Scams Explained – Stage 2

    Our last blog in this series recreated the offshore pension scam process. We covered the set up and hard sell.  The slick salesman prepared the unwitting victim and convinced him his pension would be better off out of the UK.

    The silver-tongued spiv, Darren, posing as an adviser, conned his new client with no problem at all.  The poor victim was duped into believing he should transfer his pension into a QROPS – an overseas pension scheme.  The con worked because the experienced scammer pressed all the right buttons:

    Your pension will be looked after better, it will be cheaper to manage, you’ll pay less tax, you won’t lose half of it when you die, you’ll get to choose your own pension investments!

    Of course, the scammer, didn’t point out that once out of the UK, John’s pension would have no protection.  Complete control of the money would be squandered will now lie in the hands of the unqualified, unlicensed scammers.

    The victim, John had stressed:

    I’ve paid tax all my life, so I feel I’ve paid my dues. I definitely don’t want to pay too much once I’m retired because every penny is going to count.

    But sadly he’s played right into the scammer’s hands.  His precious pension will be transferred into a QROPS and then into an insurance death bond:

    John: I worked for thirty years to build up that pension and I don’t want anything to happen to it.

    Darren: So, let’s look at all the ways you can improve your pension and make sure its protected.

    But far, far from improving or protecting the investor’s pension, the scammer has removed the precious retirement fund from the safety of the UK.  He’s sent it off to Malta or Gibraltar and then on to the Isle of Man or Guernsey.  The money is now well beyond the protection of British regulation or compensation. 

    John had stressed how he wanted low risk, but has now signed dozens of forms – and this will guarantee that his pension will be exposed to high risk.  Darren didn’t give him a chance to read or understand these long and complex forms.  And the most important form of all was a blank investment dealing instruction.  Once this has been signed by John, the scammer can copy it dozens of times and invest the pension money in whatever pays the highest commission.     

    Blank dealing instructions

    The whole point of this scam is for the scammer to make money out of the victim by a whole series of hidden commissions.

    Darren: My firm would charge you a small fee for setting up the transfer and then looking after your pension investments moving forwards.

    But what will actually happen is that the scammer will openly charge three or four – or more – percent in set-up fees, plus one or two percent a year service charge.  But, under the table, he will earn a further 7% hidden commission from the death office – such as Quilter International, Utmost International, RL360 or Friends Provident.

    Darren: Right. And then we can start investing your pension and making it grow – so you’ll be able to have a happy and healthy retirement.

    John, and all the other victims, will be a long way from being happy or healthy.  Because the death office has a platform that the scammer will use to pick the highest-commission investments.  So John’s pension fund will be used to line the scammer’s pockets for the next ten years – as he will be stuck in the death bond for that long.

    Commission based

    Investments that pay the highest commissions – such as structured notes and unregulated collective investment schemes – are also the highest in terms of risk.  John’s pension can now only lose money.  And as the value of his hard-earned retirement savings goes down and down, the scammer’s commissions will keep on going up and up.

    John, along with all the other victims, will end up losing part – or all – of his pension.  He may well lose his home, see his marriage break up, develop depression or a life-threatening illness.  He may even take his own life.     

    But John and his dire poverty will be long forgotten by the slick, silver-tongued scammer.  He’ll be busy rubbing his hands with glee at his next batch of victims.  Because there’s plenty of them and this form of pension fraud is showing no sign of slowing down any time soon.

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  • CRIMINAL CASE AGAINST UNLICENSED FINANCIAL ADVISERS

    CRIMINAL CASE AGAINST UNLICENSED FINANCIAL ADVISERS

    Denia Courthouse
    Denia Courthouse

    CRIMINAL CASE AGAINST UNLICENSED FINANCIAL ADVISERS:

    Last month saw the first of the CWM pension scam victims testifying in the criminal court of Denia, Alicante.  Nine brave people re-lived their ordeal in front of the judge.  They answered the judge’s questions, and were then cross-examined by the defendants’ lawyers.

    Darren Kirby in front of CWM office
    Darren Kirby in front of CWM office

    The complainants who testified were all clients of Continental Wealth Management (CWM) run by Darren Kirby and Jody Smart (pictured below), as well as Premier Pension Solutions (PPS) run by Stephen Ward.  PPS was an “agent” and “partner” of AES Financial Services run by Sam Instone. (PPS and AES are now under investigation for their role in the 2011 Ark Pension Liberation scam).

    It is hard enough for a pension scam victim to be reminded of their ordeal at the hands of callous, greedy scammers.  But to have to recount in graphic detail the methods used by the scammers was hard for them to bear.

    The scammer’s typical arsenal of weapons comprises a series of lies – adeptly used to trick the unwary into handing over their pensions and life savings.  The victims who testified in Denia know these lies all too well.  And now, so too does the judge:

    Cyrus regulator logo

    LIE NO. 1: “We’re fully regulated”.  This, of course, was completely untrue.  CWM operated, purportedly, as a member of the Inter Alliance “network”.  And Inter Alliance was not only unregulated but had been fined by the Cyprus regulator for providing regulated services without legal authorisation.

    Jody Bell of CWM
    Jody Smart of CWM

    LIE NO. 2: “Yes, I’m fully qualified”.  This, again, was untrue.  Few – if any – of the people working for CWM had any financial qualifications.  They were mostly poorly-educated salesmen with the gift of the gab.  They had learned a well-used and very clever script which was designed to mislead and defraud their victims.

    Toxcic insurance bond providers; Quilter, Utmost & SEB

    LIE NO. 3: “The case for transferring your pension into a QROPS is overwhelming”.  In the case of final salary pensions, this was never true.  A guaranteed income for life from a company pension final salary scheme can almost never be bettered.  Most personal pensions should also have been left where they were.  In fact, all pensions would have been better off avoiding ending up in the hands of CWM – even if a QROPS had been the right option.

    LIE NO. 4: “Your pension needs to be in an insurance bond (Quilter, SEB or Utmost).  This is for protection and tax efficiency”.  This was never true. The bond provided no protection, no tax savings, no flexibility.  The 7% commission paid to the “adviser” was not disclosed. 

    LIE NO. 5: “Your money will be invested in blue chip companies and you will get high returns and low risk.”  High returns come with high risk – and the high commissions (paid to the scammers) were hidden from the victims.  Toxic structured notes were used for all the victims – and these are complex investment products which were only suitable for professional investors. 

    There were, of course, many other lies – including the fact that when the toxic structured notes and unregulated funds failed, these were “only paper losses”.  Plus the fact that the investors’ signatures were forged or copied on the investment dealing instructions.

    Structured Note Providers

    The second half of the complainants will be heard by the court on 9th and 10th December 2021.  Once the court has heard from all these victims (minus Bob Bowden who sadly passed away recently), the fate of the defendants will be decided by the judge.  Let us all hope this will herald an end to these types of pension and investment scams. 

    Perhaps “the end” will be just the beginning.  A new dawn for an offshore financial services industry which sells proper financial advice – and not just commission-laden products.

    CRIMINAL CASE AGAINST UNLICENSED FINANCIAL ADVISERS

  • How risky are structured products – and fireworks?

    How risky are structured products – and fireworks?

    Normally a great fan of FT Adviser – and their excellent, independent journalists – I was horrified at the recent “Guide to Structured Products” (particularly the section on how risky they are by Craig Rickman).

    Structured notes are as dangerous as fireworks and should only be used by qualified, licensed professionals.

    Noting that this article can be used towards CPD credits, I was astonished that so little attention was paid to the toxic legacy of so many structured notes since 2008. And how Rickman has failed to mention the many thousands of lives which have been ruined – as well as how many people have died or taken their own lives because of being sold these products by unscrupulous con men masquerading as advisers.

    It is not just the rogue advisers who are at fault for flogging structured notes to their unsuspecting victims – it is the life offices such as Old Mutual International who offer them on their platforms of toxic investment rubbish (including such snorters as LM, Axiom, Premier New Earth, Kijani and Quadris Forestry).

    Rickman refers to “lessons learned” and quotes how a high street bank was fined £1.5m in 2012 for flogging so-called capital-guaranteed structured products in the UK. Of course, the reality was (and is) that there is no such thing as a fool-proof capital guarantee. It is all just a question of relative risks. But the scammers just love the phrase “capital guarantee” because it virtually guarantees their victims won’t question the investments in such products. And when the losses start to appear, the advisers will fob the victims off with the well-worn phrase “don’t worry – it’s just a paper loss”. By the time the structured notes mature and the losses are crystalised, the adviser is long gone.

    It is a great shame that Rickman omits any mention of the huge offshore scandal which has been going on since around 2008. This consists of a cartel of rotten-to-the core life offices including OMI (IoM and Ireland), SEB, Generali and various other members of AILO (Association of International Life Offenders). These AILO members have been promoting and facilitating international financial crime for almost a decade and have made vast fortunes out of their evil trade.

    Of course, high-risk structured notes have played a major part in this worldwide crime. These products – particularly those flogged by Commerzbank, Royal Bank of Canada, Nomura, Leonteq and BNP Paribas – were routinely sold through armies of unlicensed, unqualified “chiringuitos financieros” (financial scammers) so that thousands of unsuspecting victims could be relieved of their life savings. The ultimate goal was, naturally, the huge commissions paid to line the scammers’ pockets.

    I once tried to get my head round exactly how structured notes work and I asked a senior manager from one of the providers to give me a couple of hours to get me up to speed. The only thing I knew for sure about structured notes was that they were routinely abused by scammers such as Continental Wealth Management. And that victims would typically lose half their life savings – and sometimes more (much more).

    The structured note expert was doing well with me as his pupil for about five minutes as he gave me a broad introduction. Then, sadly, he switched from English to Japanese, then Serbo Croatian, Icelandic and Māori . By the time he changed to Xhosa, I am afraid I was a lost cause. But I had a nice time checking out my Facebook while he gabbled on. I am no expert by a long way – but I think I know a wee bit more than the average man on the street. And I think my conclusion that structured notes should never be used for retail, unsophisticated investors is correct. In fact, that is what it almost always says on the tin:

    • Not for retail distribution
    • For professional investors only
    • Due to the complex nature of these products, investors should be made aware of the risk of loss of part or all of the capital

    And then there is what isn’t on the tin:

    • Offered by bent life offices such as Old Mutual International who do no due diligence or “asset reviews” on such products
    • Routinely used by scammers because they love the concealed high commissions
    • Have caused hundreds of millions of pounds’ worth of losses in the past ten years

    Old Mutual International – lover of all unlicensed, unqualified scammers across the globe – is now suing Leonteq for £94 million worth of toxic structured notes. The widespread use of these products has resulted in devastating losses – and victims have died as a result.

    Ironically, OMI aboss Peter Kenny is quoted as saying: “I would encourage all industry participants to work together to eradicate poor practices once and for all.” And for once I agree with him – shutting down OMI altogether would be a great start.

    Any investment is only ever as good as the quality of the advice given to the investor. Whether it is a structured note (e.g. Leonteq); a fund (e.g. Woodford Equity Income fund); a bond (e.g. London Capital & Finance); property (e.g. Dolphin Trust); an EIS (e.g. Guy Myles‘ Octopus) or the local bookmaker.

    How risky are structured products – and fireworks? And how good, safe and suitable are they?

    When I say “good” I mean “suitable“. And there’s the rub: what is claimed to be suitable by so many so-called advisers is actually suitable for their own pockets but totally unsuitable for their clients. Of course, another problem is that there are armies of firms which call themselves advisers but don’t have an investment license. They claim that they can give investment advice with an insurance license so long as they con their victims into using an expensive, pointless insurance bond (such as OMI, SEB, Generali, RL360, Friends Provident etc) and then pick from the many toxic investments offered on the bond provider’s platform.

    I like comparing structured notes to fireworks. They both need to be handled with great care and should only be used by those qualified and authorised to deploy them. With fireworks in the UK, every year thousands of people are injured and end up in hospital with scars which will last a lifetime. With structured notes, thousands people are suffering from the loss of their life savings. There have been deaths and suicide attempts – and there will inevitably be more.

    Journalists – especially financial reporters – have a duty to inform and warn the public. It is a great pity that Craig Rickman of FT Adviser has missed such an excellent opportunity to expose this rotten sector of the financial services industry. If this article qualified for CPD credits, then he also missed a golden opportunity to help financial services professionals learn to protect consumers from the dangers of structured products – and the scammers who peddle them.

  • Continental Wealth Management – “Plunder in paradise”

    Continental Wealth Management – “Plunder in paradise”

    Victims of the Continental Wealth Management scam met Mail on Sunday's Laura Shannon in Denia in July 2019
    Victims of the Continental Wealth Management scam met Mail on Sunday’s Laura Shannon

    Mail on Sunday’s Laura Shannon met a group of victims of the Continental Wealth Management scam in Denia in July 2019.

    Here is a link to her excellent article Continental Wealth Management – “Plunder in paradise”: MAIL ON SUNDAY ARTICLE

    All power to her, this young lady put all other would-be investigative journalists to shame. Laura jumped on a plane on 24th July 2019 when she and her editor heard about the Continental Wealth Management scandal. After a long, hot bus journey from Alicante airport, she got straight down to business. She spent all afternoon interviewing a large group of distressed investors. She then attended the memorial service for one victim who had been killed by the stress he suffered when he lost his pension – thanks to Continental Wealth Management’s Darren Kirby.

    Laura Shannon – putting all other “investigative” journalists to shame

    No other British journalist has bothered to do this. No other national newspaper has taken such an interest in this important story – about how British people have been scammed by British advisers in Europe’s leading expat destination.

    Clearly shaken by the extent of the Continental Wealth Management scam, and the plight of the victims, Laura was deeply moved by the memorial service for victim Mark Davison who had died two weeks earlier. After a very long and tiring day, Laura retired to her hotel to write up her notes – ahead of another full day of meeting more victims.

    So where had all the other so-called newspapers been all this time? Where were The Sun, The Times, The Telegraph, The Mirror, The Guardian, The Express? Too lazy – and clearly not concerned with this very British problem. These newspapers do indeed have some very fine journalists – but this widespread financial crime was too low on their priority list.

    The financial press – such as International Adviser – is too conflicted with its promotion of the very company behind this scam: Old Mutual International.

    On the second day of her visit, Laura Shannon met another group of Continental Wealth’s victims and also spoke to a couple in France by Skype. Her final interview with an elderly lady (who had tried to commit suicide when she lost most of her life savings to the Continental Wealth Management scammers) left her in tears.

    At lunch time, Laura headed back to Alicante airport. Four and a half months pregnant, this energetic and passionate young woman returned to her office in Birmingham to write and file her story. She left little out and covered most of the basic points. Her article left the reader in no doubt: financial crime has flourished in Spain for years.

    There are both criminal and civil actions ongoing now – on the Costa Blanca and the Costa del Sol. The days of unqualified “chiringuitos” and unlicensed firms are hopefully over. While Britain’s feeble excuse for a regulator – the FCA run by lazy loser Andrew Bailey – fails to take any meaningful action, the Spanish regulator has at least ruled that failing to comply with Spanish regulations is a criminal offence.

    The Malta regulator has tightened up rules to help stop firms operating similar scams from abusing QROPS, and deploying inappropriate investment policies. Multiple class actions in various jurisdictions are taking legal action against rogue insurance companies – such as Old Mutual International – who have encouraged and profited from widespread financial crime.

    Ward’s luxury development at 64 Calle Haya, Moraira, Alicante

    And this is the problem: crime pays. Stephen Ward of Premier Pension Solutions in Moraira is now adding to his ten mortgage-free luxury villa property portfolio in Florida by building a huge luxury villa next to his former office in Calle Haya in Moraira.

    Paul Clarke – Darren Kirby’s former business partner (when Continental Wealth Management was first set up) has for years been seen zooming around the Costa Blanca in his Aston Martin. And Jody Smart (or Bell or Kirby) – Darren Kirby’s former girlfriend has boasted of the £13 million she earned as director of Continental Wealth Management.

    Sipping champagne while publicising her fashion empire on Youtube

    Jody now runs a swish ocean-front restaurant in Calpe with fiance Franco Pearson – seemingly untroubled by the appalling trail of devastation left behind her in the wake of the Continental Wealth Management tragedy.

    But the millions made by the scammers at Continental Wealth Management pale into insignificance when compared to the fortunes made by life offices Old Mutual International, SEB and Generali.

    Not a hint of regret for OMI’s actions – or shame at his broken promises.

    Peter Kenny did promise to pay compensation to OMI’s victims. But this was just a ruse to get me to take down my blogs about OMI so that the IPO would earn him and his accomplices more £ millions.

    The Spanish regulator has made it clear it is a criminal offence to sell insurance “bonds”.

    No firm with a conscience or any professional ethics should ever use OMI, SEB or Generali. Anyone caught mis-selling such insurance bonds in Spain is committing a criminal offence and can face jail. As most advisory firms in Spain are still doing so vigorously and unashamedly (with the same old lame excuse that such bonds are “tax efficient”), the Spanish jails are likely to get pretty crowded in the not-too-distant future.

    Spain is highly motivated to protect British expats who retire on Spanish soil – and is now learning how deeply dishonest and disloyal British “chiringuitos financieros” (the Spanish regulator’s term for financial scammers) are.

    But how do people avoid getting scammed from now on?

    Part of the problem is knowing what questions to ask – and then being able to understand the answers. Unfortunately, Stephen Ward was the exception to the rule – since he was highly qualified and his firm – Premier Pension Solutions – was authorised to provide investment advice.

    1. Check that the firm is authorised (regulated; licensed). If investment advice is given, make sure the firm has an investment license: don’t be fooled into believing that an insurance license is enough. It isn’t.
    2. Check that the adviser is qualified to give financial advice. He or she must provide evidence of any qualifications claimed. If the relevant institute does not show the qualification, then the adviser is not qualified – no matter what exams may have been passed previously.
    3. Don’t get talked into an insurance bond (aka “life bond” or portfolio bond). They are expensive and unnecessary – and only serve to pay the adviser a fat commission.
    4. Don’t let an adviser invest your funds into expensive, risky assets which are only there to pay fat, undisclosed commissions FROM YOUR MONEY.

    Lastly, make sure you get everything – all costs, fees, charges and commissions – in writing. DON’T GET SCAMMED LIKE THE CONTINENTAL WEALTH MANAGEMENT VICTIMS. They will all give you exactly the same advice.

  • Fighting pension scams: Regulation

    Fighting pension scams: Regulation

    Fighting pension scams: Regulation

    If it was easy to stop pension scams, everyone would be doing it.  Clearing up the mess left behind a pension scam is a huge challenge.  This is why clear international standards need to be recognised and adopted.  The scammers are like flocks of vultures.  If people only used regulated firms, they could avoid a lot of scams.

     

    Here is our list of standards

    1. Firm must be fully regulated – with licenses for insurance and investment advice
    2. Advisers must be qualified to the right standard
    3. Firm must have Professional Indemnity Insurance
    4. Clients must have comprehensive fact finds and risk profiles
    5. Firm must operate adequate compliance procedures
    6. Advisers must not abuse insurance bonds
    7. Clients must understand the investment policy
    8. All fees, charges and commissions must be disclosed
    9. Investors must know how their investments are performing
    10. Firm must keep a log of all customer complaints

    Why is regulation so important?:

    • If a firm sells insurance, it must have an insurance license.
    • If a firm gives investment advice, it must have an investment license.

    Many advisers will claim that if they only have an insurance license, they can advise on investments if an insurance bond is used.  This practice must be outlawed, because this is how so many scams happen.

    Most countries have an insurance and an investment regulator.  They provide licenses to firms.  Some regulators are better than others.  Most regulators do some research and only give licenses to decent firms.

    History tells us that most pension scams start with unlicensed firms.  Here are some examples:

    LCF Bond, Blackmore Bond, Blackmore Global Fund, LM, Axiom and Premier New Earth – all high risk failures.  The investors have lost some or all of their money in these bonds and funds.  They were mostly sold by advisers without an investment license.  Investors lost well over £1 billion.  Advisers (introducers) earned £millions in commissions.

     

    Continental Wealth Management invested 1,000 clients’ funds in high-risk structured notes.  Investors started with £100 million.  Most have lost at least half.  Some have lost everything.  Continental Wealth Management had no license from any regulator in any country.

     

    Pension Life blog - Lack of knowledge leads to loss of funds - rogue advisersSerial scammers such as Peter Moat, Stephen Ward, Phillip Nunn, and XXXX XXXX  all ran unlicensed firms.  Peter Moat operated the Fast Pensions scam which cost victims over £21 million.  Stephen Ward operated the Ark, Evergreen, Capita Oak, Westminster and London Quantum pension scams which cost victims over £50 million.  XXXX XXXX operated the Trafalgar pension scam which cost victims over £21 million.

    Phillip Nunn operates the Blackmore Global Fund which has cost victims over £40 million.  Serial scammer David Vilka has been promoting this fund.  Over 1,000 people may have lost their pensions.

     

    Firms that give unlicensed advice are breaking the law.  Unlicensed advisers often use insurance bonds.  These bonds pay high commissions.  The funds these advisers use also pay high commissions.  The advisers get rich.  The clients get fleeced.  The funds get destroyed.  Insurance bonds such as OMI, FPI, SEB and Generali are full of worthless unregulated funds, bonds and structured notes.

     

    Unlicensed firms hide charges from their clients.  Most victims say they would never have invested had they known how expensive it was going to be.

    Hidden charges can destroy a fund – even without investment losses.  Licensed advisers normally disclose all fees and commissions up front.  This way, the client knows exactly how much the advice is going to cost.

     

    People can avoid being victims of pension scammers.  Using properly regulated firms is one way.   An advisory firm should have both an insurance license and an investment license.  Don’t fall for the line: “we don’t need an investment license if we use an insurance bond”.  Bond providers such as OMI, FPI, SEB and Generali still offer high-risk investments.  The insurance bond provides zero protection.  And the bond charges will make investment losses much worse.

     

    YOU WOULDN’T USE AN UNLICENSED DOCTOR.

    SO DON’T USE AN UNLICENSED FINANCIAL ADVISER.

     

     

  • Who killed the pension? Scammers; ceding providers; introducers; HMRC?

    Who killed the pension? Scammers; ceding providers; introducers; HMRC?

    In every pension scam there is one beginning, lots of middles, and always a wretched ending for the victim and a profitable ending for the scammers. The beginning is always a negligent, lazy, box-ticking transfer by a ceding provider – the worst of which always tend to be the likes of Standard Life, Prudential, Scottish Widows, Aviva, Scottish Life, Aegon, Zurich etc.

    Pension scams are rarely simple and there are many different culprits to blame for the losses. The one common theme though, is that not one of the parties involved is prepared to take the blame for the victims’ losses – EVER. It was always someone else’s fault.

    The pension scam trail is rather like a game of Cluedo.  The question is: “who murdered the pension fund?”.  We travel around the board trying to decipher who is to blame: at which point was the pension fund truly put at risk? – and with what weapon was the pension fund murdered?

    While the pension fund transfer always starts with the negligent ceding provider, there are financial crime facilitators long before this: our old friends HMRC and the Pensions Regulator.  HMRC registers the scams – often to repeat, known scammers.  HMRC does no basic due diligence and deliberately ignores obvious signs that the scheme is an out and out scam.  Then HMRC does nothing to warn the public when they discover there are dastardly deeds afoot.  In the case of an occupational scheme, the Pensions Regulator allows the scheme to be registered and is slow to take any action even when obvious signs of financial crime emerge.

    In recent cases, we have seen complaints – by the victims of scams – upheld against the ceding provider’s negligence in releasing the pension funds to the scammers and financial crime facilitators.  And yet neither HMRC nor the Pensions Regulator is ever brought to account.  The biggest problem is that – in the case of pension liberation – HMRC will pursue the victims and not the perpetrators.  This then compounds the appalling damage done to thousands of people’s life savings.

    We have often seen serial scammers like Stephen Ward behind scams such as Ark, Capita Oak, Westminster, London Quantum etc., and yet neither HMRC nor tPR take any action (except to pursue the victims for unauthorised payment tax charges).  This is neither just nor reasonable – and yet this practice continues unchallenged.

    Any half-decent detective would then turn his attention to the “introducers” and cold callers.  These people draw in the victims with unrealistic promises of fat returns and “free” pension reviews.  In the case of the London Capital & Finance investment scam, we have seen hard evidence of how lucrative introducing and lead generation has become.  Surge Group earned over £50 million promoting the scam which saw 12,000 victims lose £236 million worth of life savings.  Surge boasts that it has over 100 staff and that they are treated very well: “We have our own in-house Barista who makes the best flat whites in Brighton. Every day you will find healthy breakfasts, fridges brimming with drinks and snacks, weekly massages and haircuts provided onsite.”

    Pension Life Blog - Whose to blame, scammers, ceding providers, receivers?

    In the case of the Continental Wealth Management scam, there was a further trio of suspects: life assurance companies – Generali and SEB and OMI.  These providers of expensive “life bonds” pay the scammers 7% commission and facilitate the crime of defrauding victims into investing into high-risk, expensive, unsuitable investments that earn the scammers further fat commissions. Even when the portfolios have been partially or even fully destroyed (murdered), the life offices still take the huge fees and blame the advisers such as CWM – or even the victims themselves.

    We also have the so-called regulators – such as the FCA (Facilitating Crime Agency) and tPR (the Pension Rogues), who are supposed to help protect the public from becoming pension scam victims. But these limp and lazy organisations are so slow off the mark, that the scammers have long since vanished by the time they take any action. This is evident in the recent London Capital and Finance investment scam; the FCA was warned back in 2015 but – of course – did nothing.

    Another suspect in the pension murder crime scene is the Insolvency Service.  Back in May 2015, the Insolvency Service published their witness statement in the case of a large cluster of pension scams – including Capita Oak, Henley Retirement Benefits, Berkeley Burke and Careys SIPPS – all invested in Store First store pods.  The total scammed out of 1,200 victims was £120 million – and yet the only action that the Insolvency Service has taken has been to try to wind up Store First.  Four years later.  And all this will do is punish the victims even further – on top of HMRC punishing the victims by issuing tax demands.

    The burning question is:

    How long can all the parties involved in these pension scams, go on letting this happen and say it has nothing to do with them? In some cases we have the ceding providers blaming the victims for their losses!

    Still, to this day, we see victims’ life savings invested in toxic and expensive assets.  Nothing meaningful is being done to put a stop to it. The victims lose their money and the scammers escape with bulging pockets full of cash.

    Other suspects include the advisory firms – some of which have no license to provide financial advice and few have sufficient professional indemnity insurance.  Henry Tapper recently wrote an interesting blog recently about the FCA’s suggestion that financial advisory firms should have much higher PI cover.

    In the offshore advisory space, regulation is still hit and miss – with some firms providing investment advice with only an insurance license.  And many providing advice with no license at all.  But still QROPS and SIPP trustees routinely accept business from these “chiringuitos”.  But even the properly-regulated ones still routinely use expensive, unnecessary “life” bonds – and we now have hard evidence that this is a criminal matter in Spain after our recent DGS ruling against Continental Wealth Management and all associated parties.

    The saddest footnote to this blog is that many so-called “experts” seem to think that the real culprit is the victim himself.  They state that people who fall for scams were “stupid” or “greedy” or “should have known better.  The well-worn trite phrase: “if it sounds too good to be true, it probably is” gets trotted out all too frequently.  But when even regulated and qualified firms and individuals have convincing sales patters that effectively con people into expensive, high-risk arrangements with hidden commissions and fake promises of “healthy” returns, is it any wonder that so many pensions are murdered every day?  And when large institutions like Old Mutual International and Friends Provident International facilitate such pension and investment scams, is it any wonder that so many highly-intelligent, well-educated people get scammed?

    Ask the victims of not just the £236,000,000 London Capital & Finance fund (bond), but also:

    Axiom Legal Financing Fund – £120,000,000 (most of which offered by OMI and Friends Provident International)

    LM Group of Funds – £456,000,000 (most of which offered by OMI and Friends Provident International)

    Premier Group of Funds – £207,000,000 (most of which offered by OMI and Friends Provident International) – including Premier New Earth and Premier Eco Resources

    Leonteq structured notes – £94,000,000 (all of which offered by OMI)

     

     

     

  • Generali – jumping ship to avoid new regulations?

    Generali – jumping ship to avoid new regulations?

    Pension Life Blog - Generali jumping shipThe mis-selling of life assurance policies and long-term savings plans has been a regular topic in our blogs.  Many victims of pension scams see their funds mis-invested into life assurance policies. These life assurance policies do little more than drain the fund value with their expensive fees and costs.

    Generali has for years been aggressively peddling these toxic products.  Interestingly, they have just pulled their contractual savings plans – Vision and Choice – from the UAE market.  Interesting and attractive names for profoundly ugly, expensive and destructive products.

    We have to wonder if all the negative press surrounding Generali’s life assurance bonds has anything to do with it? Since 2016 there has been a huge rise in complaints surrounding the mis-selling of these products. With huge, concealed start-up costs, the funds rarely ever reach their original investment amount, let alone make a gain.

    Furthermore, there has been a third push on regulations to improve how savings, investment and life insurance policies are sold. AND the Spanish insurance regulator (DGS) just confirmed that all such products sold in Spain have been done so illegally But Mr Vitiello of Generali claimed their decision to stop selling the Vision and Choice products in the Emirates was not linked to the new regulations. REALLY?!?!

    Reported by The National. ae, Generali’s Marco Vitiello stated:

    “We will not be accepting any new business applications for our current unit-linked saving products,” said Vitiello – General Manager of Generali’s Dubai branch. “There will be no impact at all to existing clients and contracts. They will continue to be serviced in the same manner as before.”  In other words, they will just keep on losing money, being tied in for an unacceptable length of time and paying extortionate charges.

    This is not the only big change Generali has made this month. The National.ae also reported that:

    “Generali’s decision to stop distributing its contractual savings plans in the UAE came less than a week after the company sold its entire shareholding in its unit, Generali Worldwide Insurance, to the Guernsey-based Utmost Group”

    We wrote about the proposed merger between Generali and Utmost Group back in August 2018.

    Pension Life Blog - Generali - jumping ship to avoid new regulations?

    The Utmost Group now has over £33bn in assets under administration and over 240,000 customers. We can only hope that customers of The Utmost Group will not become victims of mis-sold life assurance policies like the ones of Generali.

    Generali was one of the culprits involved in the huge Continental Wealth Management pension scam, which saw as many as 1,000 victims, invested into high-risk, toxic, professional-investor-only structured notes.

    Whilst the bulk of the victims were placed into OMI bonds, at least 25 (but probably nearer 100) of the victims were placed into Generali bonds by the scammers. The sum total of 25 pension funds invested into these toxic insurance bonds was a whopping £6,314,672. The losses on this amount are calculated to be approximately £3,604,528.

    One victim invested £793,612 and has just £62,703 left! Losing a massive £730,909.

    Another victim invested £142,626 and has lost £90,618! Leaving him with a fund of just £52,028.

    Please note these figures are correct as at 2017/2018, so today’s value is now even lower. Despite the funds’ huge decrease in value, Generali continues to take their fees (based on the original amount deposited – not the current depleted value). Therefore, these amounts will continue to fall AND despite the massive loses be locked in for a fixed term.

    It is, of course, a relief to know that they have decided to stop peddling these toxic, inappropriate bonds to victims. But we can’t help wondering why Generali have suddenly done this and really feel for those already caught up in these bogus “life” policies. Seems to us Generali are jumping ship to avoid the new regulations. With sudden revelations that maybe they should have checked all the details just a little bit more – and declined to take business from unregulated scammers.

    As Generali are busy making changes and sales, we can only hope that compensating the victims of the CWM scam is on their to-do list. As they have sold their entire shareholdings, you might think that an honest firm would want to make right the wrongs they have done.

     

    Not only did Generali allow these 25 victims to be put into wholly inappropriate funds and high-risk structured notes, but these investment instructions were also accepted from unregulated advisers. The scammers were paid high commissions by Generali and there is no sign of any remorse for the huge losses suffered by the victims.

    What we do know is that victims are now preparing their complaints against Generali and CWM. The DGS has found that there is no doubt that the regulations of sale surrounding these products were breached by Generali.

    Generali are not the only life office guilty of financial crimes: Old Mutual International and SEB were even worse – facilitating losses on a massive scale in the Continental Wealth Management case.  OMI bought £94,000,000 worth of ultra-high-risk structured notes for retail investors – resulting in huge losses.  Old Mutual was also heavily involved in more than £1,000,000,000 worth of losses in the Axiom, LM and Premier investment scams.

    Seems it is no accident that “Generali” is an anagram of “Liar Gene”.

     

     

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  • Ten Essential Standards For Pension Advice

    Ten Essential Standards For Pension Advice

    Ten Essential Standards For Pension Advice:

    The ongoing war against pension scammers continues with no sign that the end is near.  The authorities stand idly by – facilitating mis-selling and outright fraud.

    HMRC happily registers pension scam after scam after scam (followed by tax demands).   Prosecutions are few and far between.

    The only conclusive way to stop scammers is to ensure there are no victims for them to scam. AND the only way to do this is to educate consumers and drum the TEN STANDARDS into them.

    PENSION SCAMMERS MUST BE STOPPED!

    Ten Essential Standards For Pension Advice:

    Do you know what a pension scammer looks like? The unfortunate answer is, he looks like any other Tom, Dick or Harry (or James, Stephen or Darren) walking down the street. Not only is he good at disguises, he also has the gift of the gab and he will have you convinced that the pension transfer he is offering you will pave the rest of your life with gold. In reality though, the gold will be short lived (or non-existent), and some or all of your fund will probably go poof! (along with the adviser).

    Pension Life Blog - Ten essential standards for every adviser and their firmMuch as a master illusionist takes your breath away with his magic, a master scammer takes your money away with his silver tongue. You will be left wondering just how this smart-looking, sleek-talking ‘adviser’ managed to leave your pension – and probably your life – in tatters. 

    We have compiled a list of ten standards that EVERY firm offering pension advice should adhere to.  Every qualified adviser working for an advisory firm should also be able to meet all of these standards. On Facebook recently, one reader stated: “Why would anyone respond to an unsolicited offer to manage their money from a complete stranger?” The answer is, “I don’t know, but they do!“.  So, get to know a financial adviser long before you let them anywhere near your finances.  

    In the case of Capita Oak, for example, we saw many targeted victims who were struggling financially.  So, the offer of a lump sum release and the opportunity of an investment that promised “guaranteed returns” was music to their ears.

    Pension Life Blog - Ten essential standards for every adviser and their firm

    Many of the victims didn’t stop to think; didn’t pause to ask the right questions; or do any research to make sure the pension offer came from a viable, credible, regulated firm. The victims just said “yes” as they thought the transfer would make life easier.

    For example, with the awful benefit of hindsight – six years on – the Capita Oak victims are grappling with tax demands from HMRC and the possibility that the investment they are trapped in will go into liquidation.  These people all wish they had stopped and thought before going ahead.

    Sadly, the Capita Oak members who were defrauded by a bunch of scammers, (many of which are under investigation by the Serious Fraud Office) such as XXXX, Stuart Chapman-Clarke and Stephen Ward, are not alone.  Thousands of other victims of both UK-based and offshore scams and mis-selling are facing similar regrets: these include victims of scams such as Evergreen New Zealand QROPS; Fast Pensions, Trafalgar Multi Asset Fund/STM Fidecs; Blackmore Global Fund; and Continental Wealth Management.

    Mastermind serial scammer Stephen Ward has orchestrated a whole array of different scams over the last nine years.  One of the biggest ones was Continental Wealth Management – a 1,000-victim scam. Ward was once a fully qualified and registered adviser and a pension trustee. He has destroyed dozens of pensions funds and thousands of victims’ lives. Yet he has never been prosecuted or forced to pay back even one penny of his victims’ losses.  Only at the end of 2018 was he finally banned from being a pension trustee. 

    Most of the known scams used cold-calling techniques to reel in their victims. Whilst we saw a cold-calling ban on pension sales in 2019, we have already had reports that sneaky firms have changed their scripts to avoid fines. AND we are now seeing scammers focus their targets back onto expats. Which makes us worry there will be more QROPS disasters in the pipeline from now on.

    Just a few minutes of research – as well as knowing the right questions to ask and understanding what standards an adviser and firm should adhere to – could have prevented past victims from losing so much of their precious pension pots.  We can’t change what happened in the past – other than to take action against the scammers and negligent advisers – but we can help consumers understand what they should be looking for in an adviser:

    STANDARDS ACCREDITATION CHECKLIST FOR FINANCIAL ADVISERS:

    1. Proof of regulation for all services provided by the firm and individual advisers in the jurisdiction where advice is given
    2. Evidence of appropriate qualifications and CPD for all advisers
    3. Professional Indemnity Insurance
    4. Details of how fact finds are carried out, and how clients’ risk profiles are determined and adhered to
    5. Details of the firm’s compliance procedures – assuring clients of the highest possible standards
    6. Clear and consistent explanation and justification of the use of insurance bonds for pensions and investments
    7. Clear policy on structured notes, UCIS and in-house funds, non-standard assets and commission-paying investments
    8. Full disclosure of all fees, charges and commissions on all products and services at time of sale, in writing
    9. Account of how clients are updated on fund/portfolio performance
    10. Evidence of customer complaints made, rejected or upheld and redress paid

    If the firm you are thinking about using for your pension transfer do not adhere to all of these standards, find one that does. Your pension pot is your life savings – so don’t entrust it to any old unregulated firm or dishonest scammer.  Remember, thousands of victims have already failed to ask the above ten questions – and will regret it for the rest of their lives.

  • Hidden charges that destroy your pension funds

    Hidden charges that destroy your pension funds

    Pension Life blog - The hidden charges that put your investment in dangerWhen we buy certain products, they have a warning on them.  Cigarette packets, for instance, state that smoking is bad for your health. The wrappers show hideous images of what might happen to you if you use tobacco.

    However, when it comes to investments, the ‘advisers’ selling dangerous investments are able to disguise the risks and costs. Offshore, there seems to be no effective code of conduct, or regulation as to what they must disclose and what they can conceal.

    Last week the FCA slammed asset managers and retail investment firms over hidden fund charges.

    When selling their investments, these firms are really good at omitting details of the full charges that will apply – not only initially – but on an ongoing annual basis as well. These hidden charges put your investment in danger.

    The FCA has stated:

    “In one case it found an asset manager had omitted a 4 per cent a year transaction cost from the UCITS Key Investor Information Document (KIID).”

    In so many pension scams, we hear that the victims were sold a ‘free pension review’; they were not told about the transfer costs; that they were not told about annual fees either.  In many cases, the transfer costs and fees work out to be considerably higher than if they had paid a proper fee for the review in the first place. These hidden costs put a huge strain on the fund and sometimes victims can lose up to 25% of their fund to hidden charges.

    Pension Life blog - The hidden charges that put your investment in dangerWhat worries us most is the lack of regulatory concern or control in respect of expensive and risky investment products. You can’t buy cigarettes without a stern health warning. The same goes for alcohol: bottles and cans clearly state how many units are in the container, and how many units men and women can safely drink per day.  They also state that alcohol should not be consumed by pregnant women.

    Alcohol companies manage to fit all this info about the dangers of drinking on a tiny label. And this poses the essential question as to why financial advisory firms are able to sell risky investments again and again – omitting clear warnings about the dangerous aspects of them.

    Also highlighted in an article by Corporate Adviser:

    “The FCA reserved its fiercest criticism for asset managers, saying it found instances where asset manager fact sheets or websites did not mention costs. When they did, they often gave the ongoing charge figure, which omitted transaction costs, performance fees and borrowing charges which are shown in the Key Information Document (KID). In one example, total charges in the PRIIPs KID equated to around 3 per cent per annum – but the only costs given in the fact sheet was the 1.2 per cent annual management charge (AMC).”

    This is not news to us at Pension Life.  It is something we have been writing about for sometime – and we have a great deal of evidence that hidden, excessive charges are a terrible blight on the face of financial services internationally.  It is indeed excellent news that the FCA has finally highlighted the dangers of such hidden charges, but now we need to make sure these dangers are highlighted to the public. CLEARLY AND VISIBLY.

    A prime example of advisers and hidden charges is the dastardly duo: Phillip Nunn and Patrick McCreesh.  This pair of scammers received £ millions promoting the Capita Oak, Thurlstone Loans, Henley Retirement Benefits Scheme and Berkeley Burke SIPPS scams – leaving 1,200 victims facing poverty in retirement.  With that disaster comfortably behind them, they then launched the £40 million Blackmore Global scam and now their network of scammers are promoting the Blackmore Bond which pays a 20% introduction commission to the introducers.

    Pension Life blog - The hidden charges that put your investment in dangerYou can’t buy a gun without going to a registered shop and having a licence.  (Although, I guess on the black market you can). If you buy a gun on the black market, it is going to be ‘hot’. The person you buy it from is going to be dodgy and it certainly won’t come with the correct paperwork.

    So if you are a normal, law-abiding citizen (and cautious investor), you would want a legitimate investment which fits your risk profile – and full paperwork disclosing ALL the charges. Make sure you pick the right adviser who will give you evidence of all these essential details.

    Dodgy advisers are still getting away with selling ‘hot’ investments: funds that are clearly toxic and dangerous to your pension fund.  These advisers manage to do this very successfully by wrapping them in a fluffy cover and selling them with an array of unrealistic promises of high returns and alleged capital protection to reel the victims in.

    When considering a pension transfer, we urge you to familiarise yourself with our ten standards.  Your adviser ought to adhere to these standards anyway – and if he doesn’t then walk away. Number eight covers what we have talked about in this blog: CHARGES.

    Your adviser MUST GIVE YOU: Full disclosure of fees, charges and commissions on all products and services in writing, before you commit. So before you sign anything regarding a pension transfer and subsequent investment, please ensure you know exactly what charges will be applied to your fund: before, during AND after.  It is also imperative to know if there is a lock-in period and early exit penalty and to make sure you are comfortable with that.

    Excessive and concealed fees can ruin a once healthy and happy pension fund – just like smoking can ruin your lungs and drinking can ruin your liver.  Hidden charges can put your funds in danger and ruin your retirement savings beyond repair.

    Here is a list of our ten standards.

    STANDARDS ACCREDITATION CHECKLIST FOR FINANCIAL ADVISERS:

    1. Proof of regulation for all services provided by the firm and individual advisers in the jurisdiction(s) where advice is given and the clients are based.
    2. Verifiable evidence of appropriate, registered qualifications and CPD for all advisers. (Where there are insufficient qualifications, there must be clear evidence of plans and preparation to achieve required goals within a reasonable, stated time frame).
    3. Professional Indemnity Insurance
    4. Details of how fact finds are carried out, how clients’ risk profiles are determined and adhered to.
    5. Details of the firm’s compliance procedures – assuring clients of the highest possible standards and assurance that risk profiles are always accurately and faithfully respected.
    6. Clear and consistent explanation and justification of the use of insurance bonds for investments.
    7. Unambiguous policy on structured notes, UCIS funds, in-house funds, non-standard assets and any ongoing commission-paying investments. Report of all investment recommendations for all clients and evidence as to how these match individual risk profiles.
    8. Disclosure of fees, charges and commissions on all products and services at time of sale, in writing, before clients commit.
    9. Account of how clients are updated on fund/portfolio performance.
    10. Public evidence of complaints made, rejected or upheld and redress paid.

    For more in depth explanation check out our other blog on the ten standards:

    Cartoon blog – Don’t be the next pension scam victim

     

  • Death of the Life Bond (Life of the Death Bond?)

    Death of the Life Bond (Life of the Death Bond?)

    Attention financial advisers in Spain/who provide financial advice to Spanish residents.            

    18th February 2019

     

    DEATH OF THE LIFE BOND:

    The Spanish insurance and pensions regulator, the DGS, made a judgment against Costa Blanca-based Continental Wealth Management (CWM) on 10.1.2019.  The order (translated and summarised below) confirmed that there are strict regulations in Spain for the sale of insurance products.  The DGS also made it clear that even if a firm is not regulated in Spain by the DGS, it must conform to the Spanish regulations.

    The deadline for compliance with the order was Monday 11th February.  Unsurprisingly, CWM failed to comply.  CWM had collapsed in September 2017 and all the scammers who worked for the firm headed for the hills (or Australia).  We are now enforcing this order by criminal action against all those responsible.  This also opens the way for similar action against any other firms who have mis-sold insurance products without complying with the Spanish regulations.

    In certain, limited circumstances, insurance bonds can be beneficial.  But in the vast majority of cases they are entirely mis-sold, and the underlying commissions concealed.  These hidden commissions prevent the funds from growing and have an ever-increasing detrimental effect on the value of the fund.  I have seen evidence of an entire fund being destroyed by irresponsible, risky, commission-laden investments.  The life offices (such as OMI, SEB, FPI, RL360 and Generali) continue to apply their quarterly charges while the funds are being destroyed – sometimes even pushing the funds into negative territory.

    Why should the use of life bonds be strictly controlled?

    I have transcribed the DGS’ judgment below.  It is an abbreviated, translated version of the original.  I also set out below the reasons why life bonds should now be strictly controlled and only sold/advised by qualified, regulated firms.  Once an international standards agreement has been established, it should be possible to ensure that only those firms who understand how to use these products properly will use them in future.

    I hope that all advisers providing insurance advice in Spain – and beyond – will now ensure that losses caused by the mis-selling of life bonds are put right.  I also hope that this policy will be adopted throughout Europe and in all other jurisdictions so that the worldwide mis-selling scandal can finally be ended.

    There will be criminal proceedings – and these will extend to the life offices themselves for profiting from financial crime.  The many victims whose life savings have been destroyed by the life offices and their toxic practices will welcome this news.  The victims themselves know intimately the numerous faults of the life offices:

    • accepting business from (and paying undisclosed commissions to) known scammers and unregulated advisory firms
    • offering high-risk, unregulated funds such as Axiom, LM, Premier New Earth and other no-hoper funds
    • offering professional-investor-only structured notes from providers such as Leonteq, Commerzbank and Nomura
    • reporting the inexorable losses but taking no remedial action
    • locking victims into the expensive, pointless bonds long after the majority of the funds had been destroyed

    This latest development with the DGS judgment will help the victims take action against negligent life offices such as Old Mutual International and Friends Provident International.  This will be a powerful weapon in the recovery process against these parasitic, negligent and greedy insurance companies.

    I set out below, in red, reasons why insurance bonds should now be strictly controlled internationally.  This is not just my opinion – but an order by the Spanish government.  In my view, this is a very sensible and useful order which is in the interests of all consumers throughout Europe and the wider world.

    Decent, ethical, regulated firms will comply with the DGS’ judgment.  The scammers will not.

    ——————————————————————————————————————————————————

    Madrid, 10 January 2019 – Complaints service file number 268/2016

    Chief Inspector of Unit – Ministry of Economy and Enterprise

    Secretary of State for the Economy and Business Support

    General Directorate of Insurance and Pension Funds (DGS)

     

    Article 6 of Law 26/2006, of 17 July, on private insurance and reinsurance mediation, which regulates the general obligations of insurance intermediaries, states:

    “Insurance intermediaries shall provide truthful and sufficient information in the promotion, supply and underwriting of insurance contracts, and, in general, in all their advisory activity….”

    The scammers do not, of course, comply with this regulation.  In fact, scammers rarely tell their clients that they are going to be put into an insurance bond.  Unscrupulous advisers often conceal how the bond will work or for how many years they will be locked in for.  Normally, scammers wave an agreement for an OMI, SEB, Generali, FPI or RL360 bond under the nose of the clients – and ask them to sign the agreement with no explanation.  Rarely do the scammers allow the client to read the document properly, or disclose the commission they will receive from selling the often pointless bond. 

    Victims will be locked into the bond long after they have worked out that the adviser has mis-sold the product purely for the 8% commission – and that the charges will prevent the fund from ever growing.  In fact, even if the underlying asset were to perform reasonably well, it would struggle to keep up with the combination of the bond and adviser costs.

    It is rarely explained that the bond is a bogus life assurance policy (or series of policies); that any life cover is only actually 101% of the original value of the funds the victim has unwittingly placed into the bond.  If all the clients had wanted was life cover in the first place, this product would represent terrible value for money.  The Spanish Supreme Court has already ruled that life assurance policies are void for the purpose of holding investments – because the life office takes no risk. 

    Therefore, the life bond fails on three counts:

    1. it is a useless life assurance policy
    2. it is a useless investment platform
    3. it does not comply with Spanish regulations.  

    I could go on: the life bond is expensive; fails to disclose adviser commissions; offers high-risk, unregulated funds; accepts business from known scammers and unregulated firms; allows professional-investor-only structured notes for retail investors.  The list is endless.

    Article 26 paragraphs 2 and 3 of Law 26/2006, of 17 July, on private insurance and reinsurance mediation, which refers to insurance brokers, establishes the following:

    “Insurance brokers must inform the person who tries to take out the insurance about the conditions of the contract which, in their opinion, it is appropriate to take out and offer the cover which, according to their professional criteria, is best adapted to the needs of the former.  The broker must ensure the client’s requirements will be met effectively by the insurance policy.”

    If the client had stipulated that he needed a life assurance policy (which he usually didn’t), the adviser should have explained fully how and why any product offered fitted the client’s needs.  This virtually never happens.  The adviser has already decided (long before he has even met the client – let alone carried out a fact find) – that he is going to flog him a bond from whichever life company is paying the highest commission.  And this is how so many victims end up with useless insurance products from OMI, SEB, Generali, RL360, Friends Provident International, Hansard, Investors Trust etc.

    Even if the client had specifically asked for – say – £100,000 worth of life cover, these “life” policies could never guarantee to provide that cover.  In a proper, bona fide life assurance contract (where the client pays a monthly premium for the life of the policy) the pay-out is guaranteed.  In these bogus life assurance policies, the value of the pay-out inevitably decreases as the charges eat into the fund.  This is normally the case when disproportionately risky investments are made by the life offices.

    Article 42 of the Private Insurance and Reinsurance Mediation Act, which refers to the information to be provided by the insurance intermediary prior to the conclusion of an insurance contract, provides:

    “Before an insurance contract is concluded, the insurance intermediary must, as a minimum, provide the customer with the following information:

    1. a) The broker’s identity and address.
    2. b) The Register in which the broker is registered, as well as the means of verifying such registration.”

    This rarely happens in practice – unless the broker is one of the very few professional and ethical firms in the expat world.  An adviser might claim to be based in one jurisdiction, but could – in fact – be based in an entirely different one.  “Passporting” is often misused as advisers “fly in under the radar” and provide advice in jurisdictions where they have no legal right to operate.

    Insurance agents must inform the customer of the names of the insurance companies with which they can carry out the mediation activity in the insurance product offered.

    Agents often have terms of business with more than one life office – but will rarely disclose the fact that some or all of them have a long history of facilitating financial crime internationally.

    In order for the client to be able to exercise the right to information about the insurance entities for which they mediate, insurance agents must notify the client of the right to request such information.

    I have never seen an instance of this happening – which is not to say it doesn’t happen.  Just that I haven’t seen it.  But then people don’t come to me when things are going swimmingly – they only come when they have lost some, most or all of their fund.

    Banking and insurance operators must inform their clients that the advice given is provided for the purpose of taking out an insurance policy and not any other product that the credit institution may market.

    And herein lies the problem: the advice is rarely provided for the purpose of taking out an insurance policy – the advice is usually given because the client wants his pension or life savings invested safely, prudently and profitably.  Few – if any – clients come to the adviser to ask for a life assurance policy.  But they get one, whether they need it – or can afford it – or not.

    Insurance brokers must inform the client that they provide advice in accordance with the following obligations:

    “Insurance brokers are obliged to carry out and provide (to the customer) an objective analysis on the basis of a comparison of a sufficient number of insurance contracts offered on the market for the risks to be covered.  Brokers must do this so that they can formulate an objective recommendation.”

    I have never seen an example of an adviser offering a client a selection of possible insurance contracts.  The adviser has normally decided which life product he is going to flog long before the client even walks through the door.  In a normal insurance contract relationship, it is the insurer which takes the risk.  But in life bond contracts, it is the insured who takes the risk – i.e. that his life cover will be substantially lower than that originally contracted and that, indeed, his fund will be severely impaired by the costs of the contract.

    On the basis of information provided by the customer, insurance intermediaries shall specify the requirements and needs of the customer, as well as the reasons justifying any advice they may have given on a particular insurance.  The intermediary must answer all questions raised by the client regarding the function and complexity of the proposed insurance contract.

    I have never seen this happen – which is not to say that it doesn’t happen.  But the adviser could only explain to the customer that the sole purpose of the life bond is to pay him 8% commission.  And that would inevitably spook the customer – so the adviser doesn’t bother.  There will surely be all sorts of flim-flam about the life bond allegedly providing tax efficiency.  However, any real tax savings will be resoundingly eclipsed by the high charges.

    All intermediaries operating in Spain must comply with the rules laid down for reasons of general interest and the applicable rules on the protection of the insured, in accordance with the provisions of Article 65 of the Law on the Mediation of Private Insurance and Reinsurance.

    I have never seen a single instance of an intermediary complying with the DGS rules in Spain or anywhere else.  But that is because I only ever hear about cases where the clients suffer losses.  The people who are well looked after by competent, professional, ethical brokers never bother contacting me – because they don’t need to!  However, I would love to hear from advisers who do abide by the rules.

    Every insurance intermediary is obliged, before the conclusion of the insurance contract, to provide full disclosure.

    Never happens in my experience.  The commission is normally concealed, and the inflexibility of the lock-in period is rarely explained.  The victims usually only find this out after they have realised they have been scammed.

    In the event that a mediator was an Insurance Broker or independent mediator, he is also obliged to give advice in accordance with the obligation to carry out an objective analysis.

    Never happens in my experience.  The adviser/mediator doesn’t use the life assurance product for life assurance, but as a bogus “wrapper” for holding investments.  Therefore, the likely outcome of any objective analysis is very unlikely ever to be fulfilled.

    This must be provided on the basis of the analysis of a sufficient number of insurance contracts offered on the market for the risks to be covered.  The mediator can then formulate a recommendation, using professional criteria, in respect of the insurance contract that would be appropriate to the needs of the client.

    I have never seen an instance of a mediator offering a selection of possible contracts – and there are no risks to be covered, as the insurer takes no risks.  This is why these products have been deemed by the Spanish Supreme Court to be invalid.  However, if a mediator were to offer a “selection” of life bonds, they would all be identical as they are all just as bad as each other.

    In the case in question, there is no evidence that the aforementioned information was provided to the client before the investment product was contracted.  Therefore, Article 42 of the regulations has been breached.

    As it has in just about every instance I have ever seen in Spain – and beyond.  In fact, one firm in Spain – Blevins Franks – only offers one insurance product and that is Lombard.  This is completely illegal.

    Therefore, this Claims Service concludes that the mediator must justify the information and prior advice given to his client, so that the obligations imposed by the Law of Mediation can be understood to be fulfilled with the aim of protecting the insured.  Failure to comply with their obligations could be considered as one of the causes of the damage that would have occurred to their client.

    I have never seen an instance of any firm complying with the obligations imposed by law in Spain.  That doesn’t mean it doesn’t happen – and I would love to hear from firms who do comply with this law so that my knowledge can be broadened.  However, if this does happen, it is only likely to be in the case of ethical firms, and they are unlikely to use these bogus life assurance policies anyway.

    The claim is understood to be founded.  In the opinion of this Claims Service, the mediating entity has committed a breach of the regulations regulating the mediation activity – specifically of the provisions of articles 6 and 42 of Law 26/2006 of Mediation of Private Insurance and Reinsurance.

    The DGS requires the mediating entity to account to this Service, within a period of one month from the notification of this report, for the decision adopted in view of it, for the purposes of exercising the powers of surveillance and control that are the responsibility of the Ministry of Economy and Enterprise.

    The entity – Continental Wealth Management – did not, indeed, comply with the DGS’ requirement.  This now gives the green light for this firm and the directors and shadow directors associated with it – as well as the life office which was complicit in this scam – to be subject to criminal proceedings.  The life offices, in this case, were complicit as they were effectively profiting from financial crime.

    The interested parties are informed that there is no appeal to this judgment.  Both the claimant and the mediating entity are made aware of their right to resort to the Courts of Justice to resolve any differences that may arise between them regarding the interpretation and compliance with the regulations in force regarding the mediation of private insurance and reinsurance, in accordance with the provisions of articles 24 and 117 of the Constitution.

    THE DEATH OF THE LIFE BOND

    I think it would be no understatement to say that this heralds the end of the mis-use and abuse of life bonds (also known as portfolio bonds or insurance bonds).  Not just in Spain, but throughout Europe and beyond.  This will be warmly welcomed by the thousands of victims who have lost their life savings to rogue insurance companies such as OMI, SEB, FPI and Generali, and unregulated scammers such as Continental Wealth Management. 

    The ethical sector of the financial advice industry will, of course, be delighted – and there will be a mad scramble by the rogues to find a way round this ruling.  And they will fail. 

  • POOF! – there goes your whole life savings

    POOF! – there goes your whole life savings

    Pension Life Blog - POOF - there goes your whole life savings - Financial adviserScammers who act as financial advisers and operate pension scams, don’t wear a badge to identify themselves – nor do they pay any redress for the devastation they cause. Oh no, of course they don’t!  The scammers dress in snazzy suits, drive go-faster cars, sport posh briefcases and speak with a silky sales tune floating out of their mouths.  All this lulls victims into a false sense of security. Promises of guaranteed high returns and capital protection, as well as tax efficiency – and then… POOF! – there goes your whole life savings.

     

    This poem was passed over to us by a twitter friend.  We think it wonderfully sums up the way scammers work:

    Pension Life Blog - POOF - there goes your whole life savings - Financial adviserPoem

    Above the calming waves, you spot a dorsal fin,

    Is it that greedy shark who’s gonna take you in?

    So you dip your toes to test and out pops friendly Flipper,

    He’s so adorable but…

    did you know his snout can also be a killer?

    You listen to his clicking sounds that dull out your senses,

    You write those cheques then wish you hadn’t been so careless,

    As you wave goodbye to Flipper, you feel like all those lemmings,

    The wistful trail of your pension and POOF!

    there goes your whole life savings.

     

    Don’t fall for the silky-voiced salesman´s tune.  Follow the guidance in our ten standards to safeguard your pension from the scammers.Pension Life Blog - POOF - there goes your whole life savings - Financial adviser

    Ten standards for a financial adviser

    1 – The firm that a trustworthy financial adviser works for will have the correct licences to advise you on your pension. It will be fully licensed (regulated) for both insurance and investment, and the adviser will not hesitate to give you proof of this.

    2 – A trustworthy financial adviser will be fully qualified to the correct level and be happy to show you their certificates. A certified adviser will work to a correct code (not a scammer’s code) and never use silky sales techniques to get you to sign over your life savings.

    3 – A trustworthy firm and their fully qualified advisers will have all the correct paperwork and this includes professional indemnity insurance.

    Pension Life Blog - POOF - there goes your whole life savings - Financial adviser4 – A financial adviser who wants to help your pension grow steadily – with safe and suitable investments – will never throw sky-high promises of super fat returns at you. Scammers love this too-good-to-be-true sales technique.  Remember, if it sounds too good to be true it probably is! And it is a sign that they are working for commission benefits that will line their pockets and probably not suit your risk profile. A pension risk profile is usually a low-medium risk which will grow steadily.  High commission investments are often high risk and also often fail – causing devastating losses.

    5 – A financial adviser that works for your benefit and that alone will never expose you to a hard sales pitch. Repeat phone calls and pressure to sign – “for fear of missing out” – are often a tell-tale sign they are working for commission. Scam advisers – working for fat commissions at the expense of customer satisfaction – will rarely respect your risk profile.  They will rarely observe any compliance ethics either.

    6 – A financial adviser that you can trust should NEVER up-sell you with ‘extra’ investments like insurance bonds. Often these are a double wrapper that will make a scammer extra commissions. These ‘extra’ investments will often simply drain your pension pot, not contribute to it.

    Pension Life Blog - POOF - there goes your whole life savings - Financial adviser7 – If your adviser tries to sell you structured notes, UCIS funds, unsecured loan notes, in-house funds, non-standard assets or any ongoing commission-paying investments, he is probably not a trustworthy adviser. Scammers love to use such inappropriate investments, which line their pockets but deplete your pension fund.

    8 – An adviser you can trust will be happy to disclose ALL fees, charges and commissions, in writing: no ifs or buts. If the adviser you are using skims round this VERY IMPORTANT information, he probably isn’t a trustworthy adviser. Hidden charges are often how scammers line their pockets and destroy your pension fund.

    9 – A trustworthy firm and adviser will ensure you have full access to accounts of how you are updated on your pension fund and portfolio performance. This should be outlined to you at the time of transfer, usually a quarterly statement AND a yearly review. If your financial adviser cannot offer this information readily – just walk away.

    10 – A firm you can trust will have all their company history readily available. This should include public evidence of complaints made, rejected or upheld and redress paid.

    Pension Life Blog - POOF - there goes your whole life savings - Financial adviserA firm with advisers who are unwilling to answer all of the questions you ask them is clearly a firm to be avoided.

    If the firm you choose and the adviser they assign to you cannot attain all ten of the standards listed – find one that can.

    Don’t risk your life savings to the tune of a silky-voiced salesman. He may look the part, but appearances can so easily fool.

    Scam victims will tell you they wish they had ensured their pension transfer had adhered to all ten of these standards.

    Cartoon blog – Don’t be the next pension scam victim

     

  • Pension scammers must be stopped

    Pension scammers must be stopped

    In the Pension Life office, we have been wondering how to get the information about pension scams more widely seen, heard and taken on board. We’d like to ensure the masses are educated and aware that pension scammers can strike from many angles, and with a variety of “deals”. Pension scammers must be stopped and together we can work towards this.

    A quick Google search of the phrase “Pension Scam” shows no end of advice available, so why is this information not being spread to the public more widely and effectively?

    Why was 2017 the WORST year for pension scams?

    Google’s current top-ranking search return for the phrase “pension scam” is How to avoid a pension scam by Pension Wise. This site offers simple and basic information on how to spot a scam and how to report it.

    This is followed by The Pensions Regulator (tPR) which, offers 5-step advice to protect a pension from pension scammers.

    In third place, the Money Advice Service offers information on “How to spot a pension scam”. Money Advice highlight that scammers can be very good at disguising themselves as bona fide, regulated companies.

    Pension scammers must be stopped

    The FCA’s website comes in fourth, with their information on smart scams, advising people to be aware that the offer of a free pension review is often cause for concern and suspicion.

    But, even with all this information out there, 2017 was still the worst year ever for pension scams. It seems that despite changes to regulations, scammers seem to come out on top nine times out of ten. Serial scammers are able to move onward and upward, scam after scam after scam.  Officials, like the regulators, ombudsmen, arbiters and HMRC just stand idly by letting it happen again and again and again.

    Maybe the problem is that the scammers are ever evolving in their behavior and tactics – and the authorities just can’t keep up.  Pension Life came about because of the Ark pension liberation scam. But scamming tactics have moved on considerably.

    We now we have noticeably less liberation and more investment scams where the introducer heads for the investment with the highest commissions, with no regard for the risk or fees that are applied to the fund.

    Pension Life blog - Pension scammers must be stoppedFurthermore, if someone does approach you via a cold call claiming to be a viable company with a convincing sales pitch – how do you know if what they are saying is genuine? How do you know if they are a qualified financial adviser? Unfortunately, in the business of pensions and finance, the sad truth is that you need to: trust slowly; question quickly.

    In the CWM case, victims saw unqualified, unregulated advisers placing low to medium risk investors’ entire funds into high-risk, fixed-term structured notes.

    Fractional scamming is also on the up.  Unqualified, unregulated firms posing as financial advisers act as “introducers” – and often introduce thousands of victims to outright scams. The funds then go through various other parties’ hands to ensure everyone gets their piece of the pie. Each party involved along the chain, creams their bit off the top of the pension fund, until the fund is a fraction of its former self.  This means it will take years to get the pension back to its original state, let alone to start showing a profit.

    Perhaps one of the most iniquitous aspects of pension and investment scams is the routine use of insurance bonds. (a significant part of the fractional scam and an unnecessary second “wrapper”).  The life offices themselves are a big part of the pension scam industry.

    Firms such as OMI, SEB, RL360 and Generali accept business repeatedly from unlicensed firms and known scammers.  These so-called “life offices” (although they really ought to be called “death offices”) sit back and watch while these scammers gamble away the victims’ life savings on toxic structured notes and high-risk investments. Despite reporting on the inexorable destruction of the funds, firms like Generali et al just keep on taking their fees every quarter – and will sometimes do so until there is nothing left in the fund.

    The best advice we can give, is to ensure you know exactly who you are dealing with and where your money will be going – every penny of it.

    There is no such thing as “free”, and there will ALWAYS be commissions and fees on any pension transfer, legitimate or not. But however much it is – as in REALLY IS – the client needs to know and accept these costs.  Many advisory firms conceal the real costs and the clients only find out what they are when it is too late, and the damage has been done.

    Make sure you have everything in writing AND read it all – at least three times, if not more!

    Make sure you understand everything: the costs, fixed terms, the risk level of investments – and if you don´t, then ask more questions.

    Keep a regular eye on your fund; don´t trust any company 100%; make sure you know exactly what your fund is doing and do not ever be fobbed off with the explanation that any losses are “just paper losses”.

    If in doubt – JUST SAY NO!!

    I am writing a series of blogs about pensions, pension scammers and how to safeguard your pension fund from fraudsters. Please make sure you read as many as possible and ensure you know everything you should about your pension transfer.  You only get one shot at getting it right – if you get it wrong, the damage may never be undone.

    If we can ensure the masses are educated about pension scammers and financial fraud, we can help stop the scammers in their tracks – globally.