Beware ......... fake insolvency advisors

Posted on October 17, 2014 by Patrick Wadsted

Have your ever searched Google for an Insolvency Practitioner - it's surprising what you find ...

An Insolvency Practitioner is required to comply with five fundamental principles, integrity, (being straightforward and honest in all professional and business dealings), objectivity, (should not allow bias, conflict of interest or undue influence of others to affect judgements), professional competence and due care, (duty to maintain professional knowledge and to act diligently within standards when acting), confidentiality, (self explanatory) and professional behaviour (comply with relevant laws and regulations and conduct themselves with courtesy and consideration with whom they come in contact with professionally)

That’s the short version. I am a member of the Insolvency Practitioners Association and licensed by them. My handbook (Edition 3 England & Wales 2014) deals with the Ethics Code in some 40 pages of red edged tightly typed text. That’s the long version. To go with this and to assist me in the performance of my duties, there are also 16 SIPs (Statements of Insolvency Practice), Technical Releases, Guidance papers, Helpsheets, an IVA Protocol and other professional regulations.

Now what of the so called unlicensed and sometimes rogue “insolvency advisors”. They do not have to adhere to any code of ethics, let alone any of my five fundamental principles. They may adhere to some or all but who knows as they are not regulated in any way. They exist only to make money for their owners which must be in direct conflict with the needs of their potential clients who maybe for example just want to avoid insolvency proceedings (if possible) or to continue their businesses without the weight of historical debt.

An Insolvency Practitioner is bound to provide professional and honest advice even if that means he or she is going to make less money by the course of action proposed. Initial meetings are usually free and a fee (if any) is always agreed before work commences.

How do we spot these unlicensed/ rogue firms. Having done a lot of research into the matter here are some of the signs:-

  • Most if not all have “paid for” google listings, usually on the first page.
  • They all have Freephone 0800 numbers
  • Most of their web sites are very professional and informative
  • They often imply membership of professional organisations by having their logos on their “Home” page. Logos spotted where membership does not exist or is impossible include, FSB, ACCA, R3, Insolvency Service, and Companies House.
  • They have enticing business names using words like Advice, Help, Assistance, Expert or Easy
  • The contacts at these firms (if listed at all!) are supposedly impressively experienced at what they are advising on with sometimes glowing testimonials

If a form of insolvency proceeding is necessary they will inevitably refer their client to a real Insolvency Practitioner who will conduct that work having charged them for the priviledge of referring them. The advice given may not be appropriate and may also be impossible to achieve. So you end up spending a lot of money to actually get nowhere forward.

My simple advice to you if you are a director whose company is experiencing financial problems is always contact a Licenced Insolvency Practitioner.