The concerns around the unregulated activities of some Introducer firms and the harm they could represent to all financial institutions who use their services continues to intensify. As much as Introducers can act as quick and relatively cheap lead generators for IFA’s and financial institutions alike, there is also a much darker side that really hits at the fundamental relationship between adviser and customer.
The FCA have highlighted two specific areas where some Introducers have been causing concern:
- Irregular Financial advice: Introducers should make it clear to their customers that they are not financial advisers. It is not always made clear by some Introducers that they do not give financial advice.
- Product bias: Some introducers appear to be also contriving with firms to direct their customers towards specific investments that they, the Introducers, have a financial interest in.
Introducers continue to make the headlines
It is highly likely that recent headline stories concerning the activities of unregulated Introducers are likely to become more and more prolific. Two of the most recent reports included a company called “Avacade” and a company called HBFS Financial Services Limited. The FCA allege Avacade have been carrying out unregulated Introducer activities without permission to do so. You can see more information about this case here. The investigation of a second company, HBFS Financial Services Limited led to an arrest which also resulted in the company closing to any new business. Cases like these will clearly have a knock-on effect on any financial companies using their services if due diligence is not used to monitor services given.
Whereas it is always the one bad apple that ruins the party for everyone, it is clear from the recent FCA investigations that everything is not as it should be. This in turn will lead to further investigations or even a tightening in regulations. While Introducers are not being monitored, managers and financial advisers alike are putting their customers, their own reputations and ultimately the life of their businesses at risk.
Monitoring activities
The FCA have laid out directives which will enable companies to protect themselves against untoward activities. This includes:
Monitor the introducer to determine that the company using the service is under undue influence;
- Analyse those relationships to ensure they remain necessary, appropriate and relevant for your type of business;
- Constantly check that introducer due diligence and monitoring processes are adequate;
But how can Financial Firms monitor introducers’ activities?
If you ask the average consumer what mystery shopping is, they are likely to describe someone independently testing the customer-employee communication and processes on the front line of the retail trade. However, ACA mystery shopping solutions has recognised that this powerful resource can be used in exactly the same way within the financial industry.
Whereas all companies operating within the financial industry have their own internal systems for monitoring processes concerned with customer communications, the unique factor with mystery shopping is it is totally independent. The mystery shopper company can provide a service which can confirm that correct processes are in order. The company would also be able to highlight areas where they can make changes and put them ahead of the game. Ultimately a financial company will be able to prove to the FCA that checks are being carried out and that customer outcomes are being achieved.
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