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Are all UCIS products too dangerous to recommend ever?

Danby Bloch, 15 Feb 2012


 

There is a seismic shift in regulation – yet again – and it is all about the regulator deciding that certain products are toxic. It is starting to look as if there are some products that are simply not worth recommending to anyone, because the FSA or its successor are likely to be deemed them poisonous. A canny financial adviser needs to work out what these products are likely to be and then stay well clear of them – even if some of them have merit.

The new regulator – the FCA – will have the power to intervene and stop sales of products it disapproves of. Recent statements from the appointee CEO have made it clear that they will aim to exercise the power.  For example, advisers can still recommend UCIS to clients, subject to various special rules, but growing noises of disapproval – official and unofficial – are coming out of Canary Wharf and one would be foolish to ignore them.

So is it ever worth recommending a UCIS to a client – however sophisticated the client and however apparently sound the investment? I am increasingly and reluctantly coming round to the view that it is now just too dangerous for an adviser to recommend any UCIS. I am not even sure, given the scope for things to go wrong, that I would suggest accepting a UCIS transaction on execution-only terms, but maybe I am being overly cautious.

Some advisers have raised the question as to whether they could continue to qualify as independent next year (post RDR) without being able to recommend the whole of the product market – including UCIS. In practice it seems unlikely to be a problem.

The trouble is that UCIS is such a broad category of products - ranging from the demented to the relatively prosaic. It includes ground rent funds and student accommodation funds, which typically have to be UCIS products because the tax or regulatory UK rules seem unable to include them.  It is a pity that clients may miss out on opportunities because the risks for the adviser will be just too great to be worth taking. But that’s progress.

 


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Danby Bloch

Editorial Director, Taxbriefs

Danby Bloch is the editorial director of Taxbriefs, chairman of city-based IFAs, Helm Godfrey and director of Nucleus, an independent wrap provider.

Over a period of more than 40 years, Danby has established himself as one of the industry's leading thinkers and  is a respected author, lecturer and trainer on tax and financial planning.

 

 

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