David Prosser: Wealth management is a con trick invented by marketing managers


Outlook For an organisation working towards an orderly break-up as part of a shake-up in financial regulation, the Financial Services Authority (FSA) is keeping itself busy. Yesterday, it revealed two big disciplinary results before lunch – a £700,000 fine and a two-year jail term – and returned to the fray in the afternoon with a broadside against Britain's wealth-management industry.

Still, these actions are not as unrelated as one might think – particularly the FSA's crackdown on a pernicious boiler-room scheme, and its warning that wealth-management companies may have done a poor job for very significant numbers of their clients.

The reaction of many people to tales of boiler-room fraud is surprise that anyone would fall for such a scam. In fact, the development of the wealth-management industry over the past decade or so has been as much an exercise in exploiting people's credulity as the more blatant frauds promulgated by boiler-room cheats.

Even the phrase "wealth management" is a con. There is no standard definition of what it means – even the FSA does not feel able to supply one – because this is an amorphous concept to which marketing directors across the financial-services industry are attracted for its pulling power.

For the purposes of this inquiry, the FSA is thinking of any company that takes investors' money and chooses investments on their behalf, either on a fully discretionary basis or by offering advice. It is the sort of thing that firms ranging from banks to stockbrokers have been doing for donkeys' years, yet wealth management purports to be a modern creation.

The idea is to convey the impression that while you may not be a person of great means, you are now able to access the sort of sophisticated financial wizardry that was once reserved for multi-millionaires employing the poshest of private banks.

However, the reality of many wealth-management services, as the FSA has now discovered, is not much more than an automated system of allocating customers' cash to often poorly managed investment vehicles with little or no attention paid to some basic principles such as the client's attitude to risk or financial needs.

Naturally, the fortunate souls lucky enough to have gained access to this bespoke financial-management service pay through the nose for the privilege, further reducing their chances of making a decent return on their investments.

It is, in short, a swizz. But since wealth-management services are marketed by companies with which people are familiar – and come with literature featuring a regulatory seal of approval – savers fall for the patter. It may be a more sophisticated scam than a boiler-room fraud, but it's also more dishonest. Thank goodness that the FSA has finally got wise to the trick.

News
newsGlobal index has ranked the quality of life for OAPs - but the UK didn't even make it into the top 10
News
people

Kirstie Allsopp has waded into the female fertility debate again

Sport
footballArsenal 4 Galatasaray 1: Wenger celebrates 18th anniversary in style
News
people
PROMOTED VIDEO
News
people
News
peopleStella McCartney apologises over controversial Instagram picture
News
Gillian Anderson was paid less than her male co-star David Duchovny for three years while she was in the The X-Files until she protested and was given the same salary
people

Gillian Anderson lays into gender disparity in Hollywood

Life and Style
Laid bare: the Good2Go app ensures people have a chance to make their intentions clear about having sex
techCould Good2Go end disputes about sexual consent - without being a passion-killer?
Arts and Entertainment
Swiss guards stand in the Sistine Chapel, which is to be lit, and protected, by 7,000 LEDs
art

The Sistine Chapel is set to be illuminated with thousands of LEDs

Arts and Entertainment
Richard Burr remains the baker to beat on the Great British Bake Off
tvRichard remains the baker to beat as Chetna begins to flake
News
i100
Arts and Entertainment
Amazon has added a cautionary warning to Tom and Jerry cartoons on its streaming service
tv
News
people
News
The village was originally named Llansanffraid-ym-Mechain after the Celtic female Saint Brigit, but the name was changed 150 years ago to Llansantffraid – a decision which suggests the incorrect gender of the saint
newsA Welsh town has changed its name - and a prize if you can notice how
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Kristen Scott Thomas in Electra at the Old Vic
theatreReview: Kristin Scott Thomas is magnificent in a five-star performance of ‘Electra’
Life and Style
Couples who boast about their relationship have been condemned as the most annoying Facebook users
tech
Arts and Entertainment
Hayley Williams performs with Paramore in New York
musicParamore singer says 'Steal Your Girl' is itself stolen from a New Found Glory hit
News
i100
Sport
Ronaldinho signs the t-shirt of a pitch invader
footballProof they are getting bolder
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

Day In a Page

Italian couples fake UK divorce scam on an ‘industrial scale’

Welcome to Maidenhead, the divorce capital of... Italy

A look at the the legal tourists who exploited our liberal dissolution rules
Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

The vintage series has often been criticised for racial stereotyping
An app for the amorous: Could Good2Go end disputes about sexual consent - without being a passion-killer?

An app for the amorous

Could Good2Go end disputes about sexual consent - without being a passion-killer?
Llansanffraid is now Llansantffraid. Welsh town changes its name, but can you spot the difference?

Llansanffraid is now Llansantffraid

Welsh town changes its name, but can you spot the difference?
Charlotte Riley: At the peak of her powers

Charlotte Riley: At the peak of her powers

After a few early missteps with Chekhov, her acting career has taken her to Hollywood. Next up is a role in the BBC’s gangster drama ‘Peaky Blinders’
She's having a laugh: Britain's female comedians have never had it so good

She's having a laugh

Britain's female comedians have never had it so good, says stand-up Natalie Haynes
Sistine Chapel to ‘sing’ with new LED lights designed to bring Michelangelo’s masterpiece out of the shadows

Let there be light

Sistine Chapel to ‘sing’ with new LEDs designed to bring Michelangelo’s masterpiece out of the shadows
Great British Bake Off, semi-final, review: Richard remains the baker to beat

Tensions rise in Bake Off's pastry week

Richard remains the baker to beat as Chetna begins to flake
Paris Fashion Week, spring/summer 2015: Time travel fashion at Louis Vuitton in Paris

A look to the future

It's time travel fashion at Louis Vuitton in Paris
The 10 best bedspreads

The 10 best bedspreads

Before you up the tog count on your duvet, add an extra layer and a room-changing piece to your bed this autumn
Arsenal vs Galatasaray: Five things we learnt from the Emirates

Arsenal vs Galatasaray

Five things we learnt from the Gunners' Champions League victory at the Emirates
Stuart Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

This deal gives England a head-start to prepare for 2019 World Cup, says Chris Hewett
Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
The magic of roundabouts

Lords of the rings

Just who are the Roundabout Appreciation Society?