"Catastrophic" financial adviser lost couple £400,000 – and he's still working
If your financial adviser cost you £400,000 through "catastrophic" advice and left you with £2,900 you’d expect them never to work in the industry again.
But David and Sheila Solomon were horrified to see Paul Herd – the man who cost them their peace of mind and left a trail of financial devastation behind him – has simply moved to a new firm.
Herd told the couple in their 60s to put their life savings into a high-risk investment fund. Then he told them to ignore written warnings. When it crashed they lost the lot.
It has taken years for the couple to get any compensation. Meanwhile Herd has a job advising colleagues at Elite Wealth Management – where his new boss has applied for him to get his licence back because he's a “great believer in giving people a second chance.”
Tell that to David and Sheila, who met Herd in 2007 when he worked for Financial Ltd, a network of independent financial advisers.
At the time their pension pot was worth £346,687 – but plunged to £281,520 thanks to Herd's advice that they invest in commercial property, which tanked during the financial crisis.
But they stuck with him – even when in 2010 he advised them to put the rest of their savings into New Earth Solutions Recycling – a high-risk, unregulated Isle of Man-based investment fund (with hefty advice fees, of course), even though they told him they were cautious investors who wanted to retire within four years, the Sunday Times reports.
He told them: "Ignore warnings."
In June 2012 Herd changed jobs again, moving to to Plymouth-based MFS Partnership and the trusting couple stuck with him. He even wrote to them advising that they ignore a written warning from their pension provider about the risks of the New Earth fund.
Sure enough, it hit financial difficulties in 2013 and was frozen – along with their money.
The couple complained to the ombudsman about Herd's advice. An investigation revealed that he had also encouraged an 82-year-old woman with a "low attitude to risk" to invest £99,000 of her £125,000 savings in the fund. Relatives complained after her death, and the ombudsman ordered MFS to compensate them.
In March 2016 the ombudsman ruled that MFS should pay the Solomons almost £500,000 – what it said their pot should have been worth had it been invested properly.
But MFS's insurance did not cover the type of high-risk product Herd had recommended – so it could not pay them back.
Two months later, the firm went into liquidation and its "client book" was bought by Elite Wealth Management, based in Penzance, Cornwall, for £30,000.
The Solomons went to the state Financial Services Compensation Scheme (FSCS) which finally awarded them £50,000 each last November – the maximum the it is allowed to pay investors.
£2,921 cheque instead of £500,000 compensation
A month later they received a cheque for £2,921 from the liquidator of MFS as unsecured creditors of the defunct company.
And they also received £90,000 from the new owners of Financial Ltd, as a settlement for the disastrous commercial property investment Herd recommended.
It means the Solomons have lost over £190,000 on their investment – which now stands at £400,000 less than the ombudsman said it should have been worth if Herd had done his job properly.
When the Solomons discovered recently that Herd had walked straight from MFS in to a job at Elite Wealth Management they were horrified.
"I couldn’t believe what I was reading," said David, 65, a retired insurance underwriter from Newquay.
"My wife and I have endured years of concern and distress due to the negligence of this person. It appears he can just carry on as if nothing had happened."
Herd's role has shocked some senior figures in the financial community:
James Daley, head of the consumer group Fairer Finance, said: "This is a tragic case and highlights a number of failings in the system.
"It seems totally wrong that a financial planner can make such a catastrophic error of judgment and continue to be allowed to practise.”
And former pensions minister Sir Steve Webb said it was "very worrying case. It should be much easier for people to check if their adviser has been in trouble with the regulators or to find out what types of advice they are qualified to give."
New boss: "We know about his past"
Elite Wealth Management founder Alan Powell told the Sunday Times he knew about Herd’s record but insisted: "I'm a great believer in giving people a second chance."
Thought it tells potential clients Herd has "attained the coveted Chartered Financial Planner title, which is recognised as the industry gold mark," and that he "prides himself in explaining complicated and technical matters in understandable plain English" it does not mention his time at MFS.
He said Herd did not operate as a chartered financial planner but was advising only on "protection" products like life insurance, and acts as a "paraplanner" – helping other advisers at the firm.
But he said Elite had applied for Herd to be re-egistered with the Financial Conduct Authority (FCA) so he could offer advice on pensions and investments again. The application was rejected but an appeal had been lodged.
Mr Powell said: "If the FCA comes out and says, 'Right, our final decision is that he’s not fit and proper,' we will get rid of him."
The paper contacted Paul Herd, who said he would comment but then did not.
Elite's founder says his company has three guiding principles: Professionalism, Integrity and Respect.
If that’s true then Mr Powell should remember the plight of the Solomons – who were shown none of those qualities – and show shameless Paul Herd the door.
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