It’s a long story but in summary it appears that Skandia sales were flagging until, in 2008, they appointed the current CEO, Peter Mann, who repositioned the business away from being a reputable investment product based company to service based company. Put simply, what this meant was re-packaging and selling other people’s products rather than investing in their own. Put simply, what it meant to savers was washing their hands of the responsibility for the products they sold whilst trading on their previous good reputation.
The transition was enabled by introducing a mechanism called the ‘wrapper’. This allowed them to include products that ordinarily would only be available to experienced investors and sell them through general retail. The EEA Life Settlements fund was and is such a product. Retail, non- expert, investors rely upon their IFAs for guidance but most IFAs, especially the smaller firms, are not party to the same market intelligence as companies the size of the Skandia group and are rarely, if ever, invited to the cocktail parties and presentations at which the regulators convey their sentiment about various investment classes. The result being that those individuals who invest in Skandia wrappers are hung out to dry when things go wrong because nobody warns them.
In December 2006 the former head of supervision for the Financial Services Commission of the Isle of Man said of such funds, ‘They have found a way, as a result of insurance wrappers, into a marketplace they were never designed for and into the hands of investors who, it would seem, haven’t had the risks properly explained to them.’
In 2006, Skandia’s current boss ran Bankhall, (guess what a services company!) where he was an active member of AIFA, lobbying the FSA and taking part in panel debates on key industry topics. So you might think he would be aware of the danger when he introduced the strategy to Skandia in 2008.
To this date Skandia continues to market wrappers and their growth in sales and profits have soared.
They decide which products may be included in their wrappers but leave it up to the (often inexperienced) savers and their IFAs to select from within their range. So what would happen if they became aware that a product within their wrapper range became unsuitable? Or what would happen if the product supplier went bust? What would happen if they found that a product was no longer legal?
The answer to all these questions is the same; nothing would happen. I asked Skandia under what circumstances they would remove a product from their wrappers (known as their CIB or collective investment bonds), even giving the above examples, and their response was that no action would be taken and no product would be removed. In their words:
“A fund would only cease to be available through the CIB if it no longer met (1) the definition of a collective investment scheme or (2) Royal Skandia’s own internal administration requirements, e.g., reduced frequency of dealing.”
I reiterated my concerns, asked again and escalated my concerns to the senior executive team. The answer was the same. Skandia will do nothing to protect their customers unless a product ceases to meet the definition of a collective investment scheme or becomes a burden for their admin. Customers don’t figure in their criteria.
In fact the protection of customers doesn’t really figure in their grand services strategy either. The whole idea is to shift the risk and cost of monitoring products downstream to IFAs whilst trading on a previous reputation built on an entirely different business model. Needless to say, the FCA sits on its hands, content in the knowledge that IFAs can once again be the scape goat if, or should I say when, things go wrong and savers once again are the losers.
As a new wave of inexperienced investors gains access to their pension funds and the government and FCA plans to ‘automate’ investment advice flounders in disarray, the writing is on the wall.
So if you have, or are considering a Skandia wrapper, you know what to do to protect your savings.
http://epetitions.direct.gov.uk/petitions/63482
Action Group For Life Settlement Fund Investors 