The Dangers of Unlicensed Advisors
They claim to remove the worry, they claim to help your clients avoid their legal duties but your clients will pay the price by making their financial situation worse. They may even end up breaking the law.
The marketing letters, telephone calls and website marketing make many promises but the wrong decisions based on inadequate advice can be disastrous.
The activities of unlicensed insolvency advisors has become an increasingly hot topic recently. So R3, the insolvency trade association, has issued guidance to both individuals and businesses.
It summarises as follows.
Ensure your client can spot the danger signs. Any of the following phrases should sound alarm bells:
- “…write off 75% of your debts with no consequences…”
- “…continue trading, keep your assets and yet benefit from writing off all your debts…”
- “…an insolvency advisor that acts for you, not your creditors…”
Ensure your client is clear about what these advisors are offering. Many unregulated advisors may give advice and start a process but then pass it on to a licensed practitioner who can act in a formal insolvency. If you are passed from one to the other you will almost certainly be duplicating fees. If your client is being asked to pay a fee make sure they know what they are paying for.
Encourage your client to ask questions. Make sure they understand what is proposed.
Ensure the advisor is licensed. Anyone can be sued for giving incorrect financial advice but licensed insolvency practitioners have insurance so that your client can actually collect. All regulated insolvency practitioners are listed on The Insolvency Service website. https://www.insolvencydirect.bis.gov.uk/fip1/ If they are not listed, they are not licensed. Use of a Famous Web Search Engine will help check the advisor’s background.
Incorrect advice can result in your client owing more money for longer or ending up bankrupt for longer. Directors can become personally liable for the companies debts and be disqualified as a Director. Whether an individual or a director your client could end up breaking the law because some behaviours carry a criminal penalty.
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