Financial advisers Phoenixing: What is this and how does it impact you?

Recent times have seen much about the growing concern with ‘phoenixing’ within the financial advice sector. If you have ever pondered what this term might mean and its implications for your financial future, then read on.  At HT Legal we believe it’s time to lift the lid on this and explain how it affects clients particularly those who have used financial advisers for their pensions and investments and may be victims of financial mis-selling.

In the financial sector, what is meant by phoenixing?

Phoenixing” is a practice whereby a financial adviser closes one firm, typically when they are facing significant claims for financial mis-selling, and then opens a new one-often transferring their unaffected clients to the new firm. In doing so, they avoid responsibility for the claims and liabilities that attach to their former firm, leaving those clients who were mis-sold pensions, investments, or other financial products with less options for redress.

Why is phoenixing problematic?

The effects of phoenixing are staggering, both in terms of loss suffered by the firm’s clients and in terms of the wider industry. Generally speaking, clients whose claims against a financial adviser have been proved have few choices left but to pursue the Financial Services Compensation Scheme (FSCS) as their sole source of recovery. The FSCS imposes a compensation cap of £85,000 for pension and investment claims. Although this would recover some losses, many have lost much more. Because of this, phoenixing leaves clients with inadequate compensation for the full extent of their losses.

Worse still, some advisers have even been guilty of profiteering from their wrongdoing. In a few cases, advisers who had shut their businesses had sent their clients with claims to a claims management company, from which they would receive a hidden commission. This is not only rubbing salt into the wound but also against the law for clients who have been deceived beforehand.

Attempts by FCA to Counter Phoenixing

Thankfully, it is in the area of phoenixing that the FCA has recently taken some promising steps. It is through such preventive measures and more-close monitoring of financial advisers that the FCA aims to ensure that firms and advisers cannot simply transfer liabilities by closing down and then opening up under a different name. This includes much greater oversight and tighter demands on advisers considering opening up a new firm after a previous closure.

These regulatory changes have made phoenixing much more difficult, although it remains a live problem for clients to be aware of. If you suspect that you have been mis-sold financial products by a firm that is now closed or dissolved, then you should find out what rights you have and what your options are in making a claim for compensation.

Are You Still Able to Make a Compensation Claim Against a Closed Firm?

Actually, the closure of a financial advice firm doesn’t mean you can’t still apply for compensation. Many people believe that if a firm is no longer trading, your only choice is to go through the FSCS and accept the £85,000 cap on compensation however this is not the case.

HT Legal specialise in making claims through the courts against financial advisers who are no longer trading. Claims can still be pursued provided that they are brought within the limitation periods that apply. Professional indemnity insurance is one key factor, this is a type of insurance required to be held by each regulated financial adviser. This insurance is actually designed to cover claims of financial mis-selling, and many closed firms remain insured for a period after they have ceased trading.

This means that, by taking legal action, you may recover much more than the £85,000 limit that FSCS applies. Claims can result in compensation up to £400,000 in some cases, an amount much more likely to reflect the true extent of losses suffered by clients of pension or investment mis-selling.

LEBC Group: A Case to discuss for financial advisers phoenix

A good example where this might be relevant is the case of LEBC Group, with a national advice firm recently entering administration over 200 potential claims having been lodged with the FSCS regarding unsuitable pension transfer advice. The FSCS continue to investigate these claims which can sometimes take years. However LEBC will have had professional indemnity insurance in place when they gave the advice which should therefore cover claims brought against the firm in appropriate time limits. In situations like this, pursuing a claim through legal channels may offer the potential for far greater compensation than relying solely on the FSCS.

Why You Should Consult a Solicitor

If you have lost money due to mis-selling and the adviser has ceased trading, consulting a solicitor may make a difference in the outcome of your claim. A solicitor can assess the specifics of your case and decide if court action is viable in pursuing the maximum amount possible in compensation on your behalf.

We work on no-win-no-fee, which means that there are no up-front costs to you.
HT Legal aim to offer risk-free, transparent legal advice with the goal of seeing you awarded the compensation you deserve without adding any financial uncertainty.

Contact us today for a free, no-obligation consultation to find out if we can help you with your claim.

How Phoenixing Affects You

The impact of phoenixing can be utterly devastating to some pension and investment customers. Not only can it reduce the amount of compensation you might potentially claim, but it often leaves you feeling powerless and uncertain of your next move. If your financial adviser has closed their firm and you believe you have a valid claim for mis-selling or professional negligence you are not alone.

Let our expert legal team at HT Legal guide you through all the complexities that making a claim, we will do all the heavy lifting to help get you the right amount of compensation.

Why not book a free consultation today?

Protecting Your Financial Future

Phoenixing is just another reminder of the need for accountability in the financial advice sector. Evasion of liability using such an unethical practice has left a lot of uk consumers feeling left out in the cold. However, through the combined channels of legal recourse and regulatory oversight from regulators the FCA, clients will be able to continue to invest and save with confidence.

Contact us now if you have been a victim of Financial advisors phoenixing, mis-selling or negligence. We are dedicated to assisting our customers in recovering all losses and regaining confidence. Our no-win-no-fee approach means even if you submit your claim throng courts you can do so without any financial risk, safe in the knowledge that we are invested in your success.

Don’t wait. Act today.

The earlier you take action, the higher your possibilities of claiming the compensation you rightfully deserve. Call us on 0800 041 8358 or visit claimmyloss.co.uk to receive your free consultation.

HT Legal: Let us help you take the first step toward reclaiming what you’ve lost.

Don’t let financial adviser mis-selling, negligence or phoenixing mean that you’re left out of pocket, act now.