Adviser ordered to pay compensation for flawed pension transfer advice

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The Financial Ombudsman Service (FOS) has ordered a financial advice firm to compensate a client for failures in pension transfer advice provided over ten years ago.

The FOS said that Insight Financial Associates failed to advise on the suitability of an unregulated overseas property investment when it set up a SIPP for Mr K in 2010.

Mr K had an existing Self-Invested Personal Pension (SIPP) with a mainstream provider worth around £37,000. He met an agent who introduced him to the idea of investing his pension savings in an ‘off-plan’ overseas property in Cape Verde. Mr K agreed to transfer his pension savings into the property and was introduced by the agent to Insight to set up a SIPP.

In 2018, Mr K wanted to sell the investment – but he found out that it was unlikely that the property could be sold. He complained first to Insight and later to the FOS, that the investment was too high risk and unsuitable for him.

Insight claimed that it had only advised on the SIPP to hold the property and not about the suitability of the property investment itself. Insight insisted that Mr K had already decided to buy the property when it was introduced to the firm.

The Ombudsman, Caroline Sterling, upheld Mr K’s complaint. In her decision she said that Financial Conduct Authority (FCA) rules meant that the firm had an obligation to advise on the suitability of the proposed investment. She said that “Mr K’s circumstances do not indicate that he was prepared to lose all his money in the pension scheme or that he could afford to do so. They also didn’t indicate that he was suited to the risks this investment presented.”

Insight was ordered to pay into Mr K’s SIPP to increase its value to the notional value of his previous SIPP had he remained invested. The adviser was also told to pay Mr K £250 for the trouble and upset caused.

“This is another instance of the FOS not accepting that a financial firm can limit its participation to one aspect of a transaction,” said James Burgoyne of Brunel Professions. “While this case happened ten years ago, there should be no doubt in advisers’ minds that the FCA and FOS are taking a very close look at pension transfer advice and are penalising advisers who do not reach the required standard.”

The Ombudsman’s decision has been posted on the FOS website. Articles about the case have been published by FT Adviser and Financial Planning Today.

Professionalindemnity.com is owned by Brunel Professions, which is a leading professional indemnity insurance broker in the UK. Click here to get a quote or call 0345 450 1074 to speak to a broker.

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