William Kay: Common sense is the best defence if it all looks too good to be true
Saturday 04 September 2004
The formal crucifixion of David Aaron by the Financial Services Authority this week will send a chilling message to other independent financial advisers tempted to cut corners in their hunt for business.
Until this year Mr Aaron ran David M Aaron (Personal Financial Planners) Ltd from Milton Keynes in Buckinghamshire. The FSA has banned the firm for widespread mis-selling of precipice bonds, and may also take action against Mr Aaron and his colleagues.
In uncompromising language that will strike fear in the hearts of others, Andrew Procter, the FSA's director of enforcement, said: "We have ensured that David M Aaron Ltd can never again function as a business and we are continuing to consider the roles of the individuals involved with the firm."
The ban on the firm is largely academic, as it is already in liquidation, but the individuals may face their own punishment in the shape of a fine or suspension. As it is, the fact that they are linked to a banned organisation means that they will have to re-apply to the FSA if they want to work elsewhere in the industry.
They are going to have an uphill struggle if they do want to do that. The FSA is going to take some persuading before letting them back in, and any new employer is going to have to contend with a barrage of rough publicity harking back to their time with Aaron.
While Aaron was the most prominent seller of precipice bonds, it was not alone, and I understand that the FSA is still looking at others to see if they merit similar punishment. But in this case the market has been as important as the regulator in rooting out this scandal.
When these bonds were invented, using futures contracts to alter the relationship of risk to reward, the marketing departments jumped at the chance to advertise returns way above the market rate. The trouble was, that meant creating the danger that investors would lose everything - as many did.
Providers have got the message. As Barclays showed this week with its new Woolwich Protected FTSE Hedge Plan, they realised that the less sophisticated investors they were chasing wanted, above all, the knowledge that their money was safe, even if it meant sacrificing some profit. So the Woolwich Plan gives investors only two-thirds of any gain.
No regulator can pick up scandals before they happen, so we are only talking about how quickly they will swing into action. Arguably, it took too long to latch on to precipice bonds, claiming that it was only its fine of Scottish Widows last year that got them on to it. The FSA admits it has learnt lessons from the Aaron episode. It has stepped up its monitoring of financial consumer products and will take complaints on 08457 300 168.
But the best defence against the cowboys undoubtedly lies in the public's own hands. That means taking the time and trouble to inform and educate yourself to ask the questions that will set alarm bells ringing: if it looks too good to be true, it probably is.
Meanwhile, those wronged by Aaron should write first to KPMG Corporate Recovery at 8 Salisbury Square, London EC4Y 8BB. Ultimately, though, redress will rest with the Financial Services Compensation Scheme.
* The rally I predicted in the gold price a month ago duly materialised, taking it up from $390 an ounce to $410 at one stage, before eventually taking a breather at $406.
So far, so good: but, as ever, the question is where it goes from here. While it is never wrong to take a profit, my hunch is that the gold price has further to go, and investors should think in terms of holding on until at least the end of the year.
Uncertainties continue to dog Iraq, despite the installation of a locally based government. And while George Bush and John Kerry run one another so close in the US Presidential election race, many investors will prefer to hug a gold bar than a share certificate.
Nothing but a temporary lull in the price-boom
Do not be fooled by this week's headlines proclaiming the end of the house-price boom. While Nationwide Building Society and Halifax came out with downbeat figures for housing prices during August, I sense there may still be some life in the boom yet.
The trouble is, as happens with all markets where there has been a prolonged rise, a queue develops of doomsters praying for the crash. We know it's going to happen, the mantra goes, so let's get it over with.
We then find that every wobble is greeted by a growing chorus of "boom over". But the bad news for the Cassandras out there is that there is an even greater number of people with a vested interest in higher prices or in getting on the housing ladder.
It is worth bearing in mind that August is an odd month. Many people are either on holiday, planning holidays or looking back on holidays: with a few exceptions, house-hunting is not top of the priority list.
But the publication of the Nationwide survey figures, and others such as Halifax, have their own impact on the market. Would-be sellers who can postpone a move are more inclined to take their property off the market if they sense that prices are softening. And first-time buyers itching to get in on the market may be tempted in rather than wait any longer.
Depending on whether - and when - we see further rises in interest rates, I predict that we will see house prices going up again by the end of the year.
Five Questions On: Mortgage affordability
Is 31 May really the day when we have paid all of our tax for the year?
Women born in 1950s facing severe financial hardship over pensions could have fates changed by Ros Altmann - should she choose to help
Five Questions On: GB Energy's new tariff
Defined-benefit pension schemes: Rebate change in 2016 may leave you out of pocket
- 1 Man on naked bike ride gets ejected after becoming aroused
- 2 Charles Kennedy 1959-2015: A gifted, compassionate politician whose career was cut short by the ‘demon drink’ - latest news
- 3 Ayyan Ali: Pakistan's top model now appears in the courtroom rather than on the catwalk
- 4 Fifa corruption: Europe plots to stage an 'alternative World Cup' in place of Russia 2018
- 5 Jaden Smith wears gender fluid dress to high school prom with Hunger Games actress
Migrants in Kos: Photos show real tragedy after Brits abroad complain of 'awkward' holidays
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
Michael Gove determined to scrap the Human Rights Act – even if Scotland retains it
Threat to scrap Human Rights Act could see UK follow Nazi example, warns UN official
Why this year's general election was the most unfair in Britain's history
iJobs Money & Business
£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...
£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...
£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...
£25 - £30K: Guru Careers: We are seeking a highly-motivated and ambitious Comm...
Day In a Page
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool