The government’s ban on financial cold calling has been welcomed by financial advisers who say the move will help build trust in the financial industry.
Prime minister Rishi Sunak announced today (May 3) an outright ban on all financial cold-calling in a bid to tackle fraud.
As part of the government’s fraud strategy, all cold calls on financial products will be outlawed so that anyone who receives a call from someone about a crypto currency scheme or insurance will know it is a scam.
Alongside this, the government will also outlaw so-called ‘SIM farms’.
SIM farms are devices used by fraudsters to send bulk spam SMS messages to potential victims.
Responding to the announcement, advisers said the move will be a positive one for the industry.
“This is good news,” Ross Lacey, director of Fairview Financial Management told FTAdviser.
“There are still dodgy, unregulated firms out there cold-calling to entice potential clients with empty promises of guaranteed returns on wacky investments, or cheap-as-chips insurance policies that provide endless amounts of cover.
“This will hopefully help drive clients toward proper, regulated financial advice.”
According to the UK government, fraud now makes up 40 per cent of all crime and costs almost £7bn a year.
Research by Canada Life last year found that 38 per cent of people who had been targeted by fraudsters were contacted by a cold call.
One in six of these scams were related to crypto currency.
A number of financial scams were made prominent last year. In one instance, HM Revenue & Customs issued a warning for new homeowners to watch out for cold calls from “rogue” tax repayment agents which could leave them with large tax bills.
Gary Bush, a financial adviser at MortgageShop.com, said the ban will help improve trust in the advice industry among the public.
“Only bad can come from companies being allowed to mass-call members of the general public,” Bush said.
“Financial product transactions need copious amounts of discussion, explanation, documentation, and time for the receiver to absorb.
“Having been involved in the last 35 years in all techniques of marketing of financial products in the UK our current position of providing assistance where requested is a much more professional standpoint to take and the clients seem to love it,” Bush added.
Paul Holland, owner of Henchurch Lane Financial Services said the issues with financial cold calling was "another example of a small portion of people ruining it for the masses."
Holland said: "As a protection adviser, we once had a business model that included it and for a period of time it was actually a productive method of conducting business with people that would otherwise be unaware of the products that they could take advantage of or that would benefit them.
"The issues lies in the fact that there are too many organisations who abuse this method of contact and selling."
