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Pension case against adviser won by introducer employee.

An adviser has been told to compensate a client after the Financial Ombudsman Service found that the advice it gave to put her pension funds into an unregulated investment was unsuitable, despite her working for the introducer at the time.


The adviser firm BlackStar Wealth Management has been ordered to compensate the client following a complaint that the advice to transfer her pension into a Self Invested Personal Pension (SIPP) and invest into two high-risk investments was unsuitable for her.


Her funds were invested into a scheme called Dolphin Capital and into a discretionary managed portfolio with Beaufort Securities.


The client held four personal pensions which have had a value of £21,000 combined, however, she wanted to consolidate her plans to have more control and flexibility.


She worked in an administrative role at an unregulated introducer which made BlackStar known to her.


BlackStar recommended that she should transfer all four of her personal pensions into a SIPP and invest 58% into Dolphin and 42% into Beaufort.


She said that she was interested in investing with Dolphin as "she had contact with it every day".


This was despite its report stating that investing a large portion into a single asset was risky.


The SIPP cost £500 to set up and BlackStar's fee was £1,400.


The client (known as Mrs E by the FOS) complained about the advice she was given in 2017 saying that although she worked for the unregulated introducer she never had any investment experience.


The SIPP had resulted in higher charges and was deemed unsuitable for Mrs E as an earlier report noted that she has no capacity for loss and was a "novice investor".


BlackStar argued that Mrs E has already decided that she wanted to invest in dolphin and also wanted more control of her pension.


The firm said that Mrs E has confirmed that she worked with the Dolphin product on a daily basis and was fully aware of it.


But the adjudicator at the FOS said BlackStar should have taken into account the suitability of the intended investments when the transfer was recommended.


He said that the investment was "clearly unsuitable" as it was unregulated and illiquid. The Dolphin loan notes relied upon tax breaks in Germany which could be withdrawn, he pointed out.


He added that investing 58% of the pension into this was an over-concentration in one asset.


However, the adjudicator said the Beaufort investment has since failed and the Financial Services Compensation Scheme was accepting claims, therefore this element of the investment should be excluded from the compensation.


Ombudsman Keith Taylor decided to uphold Mrs E's complaint on the basis that she was not a qualified investor and was entitles to rely on the advice that she was given.


He ordered BlackStar to put Mrs E as closely as possible into the position she would be in now if she has been given suitable advice and to pay £300 for the distress and inconvenience caused and the impact on her retirement planning.


He said: "Although [BlackStar] set out the nature of the Dolphin investment and also set out some of the risks attached to it, I think that is should have gone further and advised that the Dolphin investment was unsuitable for her."


He added "BlackStar should certainly not have advised that 58% of the pension should be invested in this one asset.


"That gave rise to a clear lack of diversification and increased the risk being taken."


Mr Taylor divided that BlackStar should refund its fees and reimburse the client for five years worth of Sipp fees because the pension wrapper was set up to allow the investments.


He agreed with the adjudicator that any losses from the Beaufort investment should be considered separately.


If you have experienced a similar situation where your pension has been put into a Sipp and you do not feel that it was a suitable product for you, get in touch with us to see if we can assist.


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Information in this article was sourced from: https://www.ftadviser.com/pensions/2019/10/28/introducer-employee-wins-pension-case-against-adviser/?page=1


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