FCA fines IFA for allowing high-risk pension investments. Published June 2020

June 16, 2020 9:54 am Published by

A financial adviser who allowed clients to invest their pensions in unsuitable assets including the notorious Harlequin overseas property schemes has been fined over £23,000 by the FCA.

Lloyd Pope was a director and compliance officer of advisory firm TailorMade Independent (TMI), which has since been wound-up. 

Financial advisers advising client

Between 2010 and 2013 TMI arranged Self Invested Personal Pensions (SIPPs) for clients. Most had been referred to TMI by an unregulated introducer which was paid commission by the product provider.  TMI gave advice to the clients on the most suitable SIPP product, but crucially did not provide any advice on the clients’ underlying investments.  This enabled clients to transfer their pension pots into assets including green oil, biofuels and farmland, without TMI checking their suitability. However, commission was also being paid via the unregulated introducer to elements of TMI, which created a conflict of interest.

Many of the investments would not have been permitted by the clients’ existing pension schemes and the high risk nature of the investments meant that clients were risking their pension funds.

The FCA said that Mr Pope did not understand the underlying products and had not performed a risk assessment. As a result TMI would not have been able to conclude whether the products were suitable for TMI’s customers.

It fined Mr Pope for failing to take reasonable steps to ensure that the business of TMI, for which he was responsible in his controlled functions, complied with the relevant requirements and standards of the regulatory system.

Mr Pope was banned from holding a position of senior management at a regulated business in 2015.  Other former directors of TMI have also been fined and banned for their involvement in the business.

James Burgoyne of Brunel Professions says that there are many outstanding advisers who provide excellent pension transfer advice to their clients.  “However the amounts of money involved are usually very large, which makes professional indemnity insurers wary of the sector.  The small but regular number of advisers providing inadequate transfer advice has not helped,” he added.

The FCA’s press release announcing the ban has been published on its website.  Reports about the case have been published by FT Adviser and Pensions Age.

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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This post was written by James Burgoyne

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