The PFS concern is that a provider could market a product in 2006, but, when the client comes back for more money in the future, the provider may no longer be prepared to lend, may not have funds, may have closed to new business or may be charging an uncompetitive rate of interest.
The PFS message to its members is that, to protect against future claims of mis-selling, they must do a significant due diligence check on any provider recommended. This should include:
- the financial strength of the provider including ability to access further capital
- that this strength is such that closure cannot be seen as a possibility
- where the money comes from and what future guarantee there is of future funding
- at what interest rate future withdrawals will be made
Bob Bullivant, acting ceo of PFS, said: "By asking a few questions, an adviser can identify risks in the product and can document them in a recommendation.That way it will be difficult for a client later to complain that they have not been appropriately warned of risks."
