Your Money: Beware the bad adviser

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MEMORIES are short. They also tend to fail at just the worst time.

People trying to live on income from savings are feeling increasingly desperate. One caller to the offices of the Independent on Sunday this week said she had pounds 25,000 on deposit. She relied on interest from this to supplement a state pension and had seen an advertisement for a small bank offering high rates. Should she put the money in there? The bank was authorised under the Banking Act, but so was BCCI, where many savers lost thousands after being attracted by a few extra points of interest. After the event, they realised it might have been wise to spread their money around and preferably among some household names.

Small investors are also being attracted to the stock market, lured by the headlines screaming 'market hits another all-time high'. Apart from the basic risk that share prices will fall, investors are vulnerable now to the blandishments of the over-optimistic or just plain dishonest adviser or salesman.

The Financial Services Act has been been put in place since the last market boom, but even its most staunch supporters would not claim it is perfect.

Hardly a week passes without a string of suspensions by the regulator for independent advisers, Fimbra. Their misdemeanours range from 'failure to deal with the regulator in an open manner' to shirking obligations to provide professional indemnity insurance and absconding with money. All too often, these problems come to light not because they are spotted by the regulator but because the whistle is blown by someone who knows the firm.

People approaching advisers for help on how to beat falling interest rates must speak to at least two before making a commitment. Recommendations from friends can help, but they have also proved disastrous. Some of the most notorious crooks of recent years have built up small empires by engratiating themselves with a community and roping in groups of friends.

ROUTINE testing for a wide range of inherited diseases is on the horizon. Insurance companies are starting to rattle their sabres over the consequences for life insurance.

Mark Boleat, the newly installed chief of the Association of British Insurers, spoke out last week about insurers' right - as he sees it - to know about a prospective policyholder's genetic weaknesses. This does not, claims Mr Boleat, mean insurers will demand that applicants have genetic tests; they merely wish to make it clear that if someone knows for sure they are going to develop a serious illness, they must own up to it when applying for life insurance.

Mr Boleat also claims that insurers have 'many generations of experience in treating medical information in a sensitive and confidential manner'.

This might be disputed by people confronted by insurers after being identified as likely candidates for HIV infection.

The industry's handling of the HIV issue has left many applicants for insurance feeling bruised and intruded on. Life is altogether easier for those who skate over the truth when replying to the companies' questions about whether they have had an HIV test.

Life insurance is not the only area where genetic testing would be an issue. Not all inherited diseases are life-threatening. It is easy to see how health insurance could become difficult to secure if you knew you were predisposed to a minor but potentially expensive problem.

Insurers claim someone who undergoes a genetic test that proves negative would be considered a good risk. This implies lower premiums. But this has not been the reward for people who have had negative HIV tests.

Genetic testing may bring many benefits. Ease in obtaining insurance will not be one of them.

Vivien Goldsmith is on holiday.