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Fidelity to compensate over D2C platform in-specie transfer

FOS tells Fidelity to pay compensation after provider failed to explain in-specie process fully

Fidelity must compensate a client after communication issues around transferring funds from Standard Life led to him losing money.

Last year, the complainant, Mr C, wanted to transfer investments from a number of different places, including Standard Life, onto Fidelity’s direct-to-consumer platform.

He called Fidelity and submitted transfer forms and a covering letter that said he wanted an in-specie transfer

Fidelity told the Financial Ombudsman Service it did not receive the cover letter but it did receive the transfer forms. Some of the funds Mr C held at Standard Life could not be transferred in-specie so Fidelity sold them and transferred them as cash.

When he realised what had happened, Mr C arranged for the investments to be returned to Standard Life and bought back into the funds he had previously held.

However, because of price movements while his investments were out of the market, it cost him an extra £716.42 to buy back the units compared to what they were sold for.

The role of advice

Fidelity did not accept the FOS’s initial decision to uphold the complaint. It said it provided documentation that was clear about what would happen to the assets if they were not eligible for an in-specie transfer.

It also said it is an execution-only company and that if Mr C had wanted advice about the transfer he could have contacted an adviser.

Fidelity also argued it was Mr C’s responsibility to make sure arrangements were made with Standard Life so his assets could be re-registered.

Ombudsman Jim Biles stuck with his decision to uphold the complaint, saying his concerns centred on the phone conversation Mr C had with Fidelity.

The FOS said Mr C made it clear in the phone conversation that he preferred to transfer the assets in-specie. While the Fidelity employee said funds could only be re-registered if they had the same ISIN reference number, he did not go into more detail.

The decision says: “He didn’t explain it was Mr C’s responsibility to check this. He didn’t tell Mr C about Fidelity’s online eligibility tool. And he didn’t warn Mr C what would happen if he didn’t make any necessary arrangements to his existing investments first. Instead the relationship manager simply said he couldn’t see any reason why any of his assets wouldn’t be eligible for re-registration.”

It adds: “As a layman, I think Mr C would reasonably have placed greater emphasis on his discussions with the relationship manager than the documentation he received. And I think the reassurance he was given would reasonably have allayed any fears he might have had if he’d read and understood the documentation fully.”

The FOS decision adds: “If the relationship manager had explained the situation properly, including the points I’ve said he didn’t cover above, I think Mr C would have acted differently by either leaving the ineligible funds where they were or asking Standard Life to switch them into a transferrable share class. Either way, he wouldn’t have had to pay an additional amount to put himself back into the correct position. This is the reason I’m upholding the complaint and requiring Fidelity to pay compensation.”

Redress required

The FOS said Fidelity should pay compensation of £716.42 and add interest at 8 per cent per year from the date Mr C bought back into the Standard Life funds to the date the compensation is paid.

The complaint was made against Financial Administration Services, trading as Fidelity and the administrators of FundsNetwork’s Isa, GIA and pension.

A Fidelity spokeswoman says: “Fidelity respects the ombudsman’s final decision. We note the ombudsman recognised that Fidelity does not – indeed cannot – offer in-specie transfers where the equivalent funds do not exist on the Fidelity platform but that this could and should have been explained more clearly to the customer and for that we apologise. We will review this case to ensure we learn lessons on making this as clear as possible in such circumstances.”

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