When Diligence is Definitely Due 

We were recently asked by a Member to supply an opinion on a specialist cash-management service being marketed to IFAs.  We were given the link to a quite plausible-looking website, and - clearly - ValidPath would not have been asked for an opinion, if the clientele of this particular Member Firm did not have a need for that kind of service.  

Almost immediately, as I gave the matter an initial scrutiny, there were a few points of concern.  There was no sign of the relevant regulatory rubric on the website.  Neither were there any contact numbers so clients or advisers could call the firm.  Nor for that matter was there an email address.  None of these omissions, on their own, would represent an 'end of sports', but cumulatively they were sending a message that left me uncomfortable.  Furthermore, when I googled the name of the firm shown on the accompanying brochure, what came up was another firm, with a similar name, using the same logo.  Naturally enough, that leaves one with a sense of profound unease, one which was compounded when I compared the names of the key individuals showing online for the two similarly-named-but-not-quite-the-same firms, and discovered that none of them matched.

At that point, I handed the matter over to my good friend, Chris Pearce, the maestro of complex due-diligence over at ValidPathDD.  He swiftly concurred that neither the product brochure, nor the provider's website supplied sufficient information to justify using the service.  Of the information provided within the brochure, there were gaps you could have driven a cart and horses through, precisely where any diligent adviser would be seeking reassurance, and of course Chris was able to rapidly unearth connections to a cloned company, as well as to other failed or failing entities.  He even tracked down the firm's accountant, whose website looks as if it were designed prior to the invention of the internet, liberally sprinkled with '404 - Page Not Found' error messages.

It is important to note that our investigations have not proven that this firm and its product are dodgy.  All we are able to conclude from the exercise is that the combination of (a) key informational gaps and (b) worrying circumstantial evidence, should lead the responsible Adviser away from considering this particular offering.  It is still at least feasible that there are perfectly valid explanations for everything we discovered, but our decision has to be based upon the possible risks to our clients' financial capacity.  Certainly, it makes sense to incur the minor expense of outsourcing this kind of due-diligence, rather than take a deep breath and plunge into something which might involve far greater cost later on.

Complex Investment Product Due Diligence

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Kevin Moss, 09/05/2019