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Stuart Ritchie

By: Stuart Ritchie

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August 29th, 2019

How one oil and gas professional lost £210,000 to a sales tactic now banned in the UK

Financial Education

If you thought the story of the investor who lost £66,000 was shocking…

Wait until you read this.

An oil and gas professional lost an astounding £210,000…

Officially making it the worst case we’ve ever seen.

Here’s the full story.

From experience, I’ve realised the reality of this profession is:

Not everyone is going to take your advice.

It’s even harder when you know for a fact someone’s going to lose a lot of money.

But when you’re not a salesperson…

You don’t back anyone into a corner or try to sway their decision.

You can only show them the evidence of how an investment may or may not be right for them.

The decision at the end of the day must be theirs – not yours.

But this story is not about you or me.

It’s about Pete.

And understanding how you can learn from his life-altering mistake.

Here it goes…

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Pete is an oil and gas professional in Baku.

He wanted to retire in Cyprus and had a huge pension from an entire career at BP.

He’d been contacted by someone who then flew out to Baku and explained the benefits of a pension transfer over a few beers.

(If you read my blogs, you know this should have set off a few alarms) …

Afterwards, Pete asked me for a second opinion.

I told him the recommended solution wasn’t only dire but criminal in the UK.

I showed him the evidence.

Yet he responded with:

 “It all sounds like the same gobblygook to me - the guy seems trustworthy enough.”

It was an unexpected turn of events.

Why did he seek a second opinion in the first place?

Second opinions are not validations.

They should be backed by science.

They’re not mean to support your decision but offer real, unbiased insight into whether an investment will work for or against you.

uncomfortable lies large

 

What happened next…?

Pete ignored the advice, transferred his pension and paid the salesperson over £210,000 in hidden commission.

More than enough for a nice retirement villa in Cyprus.

But worse, he locked himself in a 10-year RL360 bond, full of structured products that have, and will continue to, lose him hundreds of thousands of pounds more. 

He is locked in to horrific contractual terms – to which he freely agreed.

And as much as he could have avoided making the worst decision of his life…

He chose the salesperson’s ‘advice’ over that of a fiduciary.

All because the salesperson took a flight to meet him where he was...

And no doubt offered to ‘take care of everything’ for him.

In Pete’s mind this showed “trustworthiness”.

How IFAs are paid to mis-sell pensions

 

So, who can you trust with your money?

Before you can answer that…

You need to know how to differentiate between the two main types of financial advisers – fiduciaries and brokers.

  1. You can’t tell by job title alone.
  2. Fiduciaries are harder to find - but they’re the only ones required to act in your best interest.
  3. Brokers are the vast majority - but they are paid to sell you stuff.
  4. Brokers often walk away with bags of hidden commission generated by locking you into long-term plans (like Pete).
  5. Brokers are not required by any law, regulatory body or professional standard to act in your best interests.

Tony Robbins, the best-selling author of Unshakeable, explains this conflict of interest in 5 short quotes:

“Brokers don’t have to recommend the best product for you. What?! Yes, you heard me right.”

“Brokers and their employers earn more by recommending certain products.”

“No matter how much you like your broker, your broker is not your friend.”

“How is it that profits over people has become the accepted standard?”

“Does it sound like there’s a conflict of interest here? Damn right!”

 

The ‘ignorance is bliss’ proverb means:

“If one is unaware of an unpleasant fact or situation, one cannot be troubled by it.”

Pete was ignorant of the difference between a broker and a fiduciary.

He didn’t know the signs to look out for…                        

That a round of drinks or golf could be the biggest sales tactic of all.

How investments that sound too good to be true are probably wrought with layers of hidden charges.

How face-to-face financial advice doesn’t mean better advice.

While his story is unsettling, you shouldn’t be worried.

You’re already taking the necessary steps to educate yourself on the world of financial services.

You know that knowledge equals clarity, confidence and control.

After all, you’re here and reading this.

 

One last thing…

We’ve created a tick box checklist that you can download for free to help you choose a financial adviser who has your best interests at heart. 

You never know, it might just save you thousands. 

How to choose an adviser checklist

 

About Stuart Ritchie

Stuart Ritchie is a Chartered Financial Planner, APFS, Chartered Wealth Manager, Chartered FCSI

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