Could this be the end of cold calling for pensions? Way back in the early 1980s we saw the emergence of a new breed of financial adviser; the cold calling direct salesman. Eager new recruits were handed a telephone directory and told to call as many unsuspecting victims they could in order to secure appointments with them to discuss the ‘fantastic opportunities’ available in the investment and protection world. All that was required was a week’s training and rote learning of pre-prepared scripts. The adviser was then free to sell whatever he/she could to anyone who would listen. The business boomed and the industry was changed forever. Before then financial advice was either provided by your bank or, if you knew one, an independent financial adviser who could select appropriate products from the whole market, rather than just one offered by the direct salesman.
Horror stories
I heard many stories about how sales-staff were treated, including having to stand in the corner with a dunce’s hat on or sweep the streets of Nottingham with a witch’s broom whilst wearing sack-cloth if they didn’t make the requisite number of cold-calls during a day. Owners of these companies prospered and numerous industry ‘characters’ emerged. One very well-known owner took to always dressing in a white 3-piece suit and driving a white Rolls Royce. Quite the celebrity! As well as bizarre punishments, these companies also held lavish annual conferences where the top sellers received expensive gifts and prizes. If only those who aspired to great wealth would copy them they would be able to swap the dunce’s hat for Rolex watches.
The main problem behind companies who use cold-calling as a way of developing business is that salespeople are only interested in their personal outcome; making as much money as possible by whatever means necessary. Unfortunately, we haven’t moved on very far and the problems caused by nuisance calls are, if anything, even more widespread than ever before. Since the UK government introduced pensions freedoms legislation in 2015 a new ‘industry’ has formed involving the cold calling of people in order to ‘advise’ them on pensions. Once again, the only reason this practice exists is for the benefit of the company and cold-caller’s bank accounts. Pension scams have seen a meteoric rise in the last 10 years or so; many people have lost all or a large proportion of their pension pots due to being duped into investing in either horribly speculative investments or simply fraudulent activities. Essentially, the victims’ fund is transferred either to a bona fide Self Invested Personal Pension (SIPP) or even worse, a bogus SIPP or QROPS.
The money then disappears into the ether and the criminals behind the scam fade away either never to be seen again or protected by expensive lawyers. Very few have been brought to justice and the hapless salespeople move on to the next scam. The financial services industry has been clamouring for a complete ban on cold-calling for many years and the UK government has finally done something about it by banning unsolicited calls, texts or emails for pensions. One exception is where the potential customer has previously agreed to be contacted, although this is presently a grey area. Additionally, SIPP and other pension providers must go through a much more rigorous process when setting up pension schemes. Trustees of pension funds now have to undergo a more detailed due diligence procedure. This is to be welcomed, but….
Cold calling: flaws in the legislation
Will it work? There are two major flaws in the ban. Firstly, the legislation doesn’t include investments. As such, a scammer could use a bona fide pension to make the initial transfer, then once set up, direct the money to inappropriate investments. Examples include ‘pie in the sky’ holiday resorts at the other end of the world or dodgy forestry investments. One such scheme which has recently been exposed purported to invest in Ukrainian property. Are they aware of the political situation there? Unfortunately, there are a myriad of similar schemes with no end in sight to such activities.
The second major problem is the ban only applies to the UK. So, cold-calling companies are already setting up outside the UK where they are immune to UK law. Post-Brexit, UK investors are therefore going to have to be doubly cautious when discussing investments as co-operation around the EU will probably cease or, at best, be reduced.
How to protect yourself
It’s very easy for me to say just hang up if you are cold-called. This is indeed the answer; however, I know that many people are either too polite or genuinely interested in hearing about ‘alternative investments’, and will therefore listen to the spiel. Beware! These schemes are almost always presented as ‘too good to miss’, or of ‘limited availability’ (buy now whilst stocks last). Sales-people can be extremely persuasive!
My advice, however wonderful the scheme may appear and whatever the caller says, is to hang up straight away. Also, be aware that elderly people are heavily targeted by scammers so keep an eye on your relatives too and make sure they don’t commit to what will most likely be a financial tragedy. Don’t be too proud to admit you might be wrong about the ‘nice young man’ who was so patient and polite. The people behind these companies are wrong ‘uns and don’t care what damage they do. All that matters to them is the fancy cars, yachts, watches and flashy lifestyle.
Lastly, if you really are interested in transferring your UK pension or considering making an investment, speak to a qualified financial adviser. Take your time before committing, obtain references if possible, and make sure you have the details of the appropriate regulator.