What is Active Wealth?
Active Wealth is a now-collapsed financial advisory firm. It was caught up in the British Steel Pension Scheme mis-selling scandal. In addition, the Financial Services Compensation Scheme (FSCS) has had to pay over £350k in compensation to Active Wealth's clients.
Active Wealth is also being used as an example of "phoenixing", something which the Financial Conduct Authority (FCA) is trying to put an end to.
That's the summary – let's look at Active Wealth in more detail, including its connection with pension mis-selling.
What is the British Steel Pension Scheme Mis-Selling Scandal?
In August 2017, the pensions regulator let British Steel close its original pension scheme, known as the British Steel Pension Scheme. It had been in trouble for years and was putting the future viability of the company in jeopardy.
Closing the British Steel Pension Scheme, however, meant past and present British Steel workers had to decide between one of three options for their pension:
- Let their pension go into the Pension Protection Fund
- Move their pension to a new British Steel Pension Scheme, although this new scheme was not as generous as the original
- Get a lump sum from their original pension and invest that in a private pension, i.e. a SIPP (self-invested personal pension)
This led to many British Steel workers being approached by financial advisers offering to help them secure their pension. Some of those advisers favoured advice that encouraged British Steel workers to go for the SIPP option.
This led to many successful claims for pension mis-selling compensation. In short, the advice given to some of the workers who transferred to a SIPP was wrong, usually because the worker didn't fully understand the investment decision they were making, or the risks involved.
What is Phoenixing?
The first thing to remember is that so-called phoenixing, in itself, is not illegal. Many are questioning the practice, however. Also, as stated above, the FCA and FSCS are both looking into the issue.
Phoenixing occurs when the FCA or the FSCS receives complaints about a financial advisory firm. That firm then winds itself down or deliberately fails only to rise again with some of the same employees and/or directors involved, albeit under another brand.
In other words, a company who operates in a way that causes pension mis-selling complaints and who then leaves its liabilities with the FSCS and starts trading again. One major concern that many people have with this practice is the risk the new firm will continue mis-selling.
Where Does Active Wealth Come into This?
The director of Active Wealth was previously an employee of a company called Active Investment Services. In 2014, the Financial Ombudsman upheld two complaints against this company for pension mis-selling.
Active Investment Services subsequently went into voluntary liquidation, was declared in default by the FSCS, and was then dissolved.
The client book of Active Investment Services, however, was bought by Active Wealth.
Active Wealth went on to give pension advice to 100 British Steel workers.
Last year, Active Wealth agreed with the FCA that it would stop all its pension transfer business following an FCA investigation. The FSCS has also paid compensation to some of Active Wealth's clients for pension mis-selling.
In February 2018, Active Wealth went into liquidation.
The full story of the British Steel Pension Scheme mis-selling scandal and the role of Active Wealth and other financial advisory firms is still to be fully told. After all, much is still playing out with regulators and in the courts. However, the saga so far highlights the problems that pension holders face in securing their future.