Failure to manage risk may be route to disaster

Just imagine if that adviser had suggested your money should go into a risky and unregulated investment scheme.

IFAs are required to establish the risk profile of their clients in order that recommended products fit that criteria. Imagine again if your adviser disregarded such industry practice.

Step forward Martin Rigney, who has been fined £117,330 by the Financial Services Authority (FSA) and banned whilst his company – Topps Rogers Financial Management – has been fined £97,600 and banned.

The FSA has ruled that “no assessment of the customers’ investment experience and knowledge, or of whether the investment in the UCIS (unregulated collective investment schemes) was suitable” was made.

If you have not been asked about your attitude to risk, ask your financial adviser immediately. Both you and they need to know that your savings are in the right arena.

Rigny’s firm had clients as diversely spread as Hebden Bridge, Ripon and Sheffield as well as Derbyshire, Exeter and Manchester.

Over recent years many individuals have lost money in unregulated schemes. Such investments are generally higher risk and cannot be promoted to the general public. Yet they can be sold to certified high net worth investors, sophisticated savers and those already invested in such schemes.

As the FSA has noted, investors way outside their financial comfort zone have been sold such products, sometimes within their Self Invested Personal Pension Scheme, often with disastrous consequences.

Such schemes should not be recommended to most people as they are risky and not regulated by the FSA. This means savers have no access to the Financial Ombudsman Service or Financial Services Compensation Scheme if matters go wrong.

The FSA has rightly taken direct action against several firms and advisers. Always ask your adviser to what extent a product is regulated and your protection position. Too many “low risk” clients have been put into these risky investments. Finally, spend a few moments checking on the FSA website. It reveals much that advisers prefer you do not see.