The Financial Ombudsman Service has told advice firm Kingsway Wealth Management to compensate a client who invested his pensions into residential apartments in Limassol, Cyprus.
Mr B complains that the advice to transfer his savings into a self-invested personal pension plan exposed his pension to more risk than he was prepared to take.
The case dates back to 2009 when Mr B was advised by an appointed representative of Kingsway called Pension Transfers to put his money into a Sipp.
The pension fund was then invested in Cyprus One Limited, which offered the opportunity to invest using a “genuinely diverse commercial vehicle”.
This involved investing in the development of residential apartments in Limassol, Cyprus.
In 2016, Mr B complained to Kingsway who accepted it had advised on the transfer into the Sipp but says it had no knowledge of the subsequent investment.
Kingsway rejected the complaint, initially arguing Mr B complained too late and that another adviser called Mr M was actually responsible for advice to put money into the property development.
In the provisional decision ombudsman Doug Mansell rejected Kingsway’s arguments and quoted guidance issued by the FCA in 2013 that explains the duties advisers have here.
The FCA said at the time: “Where a financial adviser recommends a Sipp knowing that the customer will transfer out of a current pension arrangement to release funds to invest in an overseas property investment under a Sipp, then the suitability of the overseas property investment must form part of the advice about whether the customer should transfer into the Sipp.”
Additionally Mansell referred to an email to Kingsway from the FCA (then the FSA) dated December 2008 which said: “In our view, it is difficult to separate advice on the merits of joining a Sipp from the merits of particular investment assets to be held under that Sipp compared to the funds and benefits from the ceding scheme.”
In its response to the provisional decision Kingsway said Mr M must have been giving regulated advice as he was advising on a Sipp, which is a regulated product.
Furthermore Kingsway believes it is not “fair and reasonable or consistent with other decisions for Kingsway to be held responsible for advising on the movement of cash out of the Sipp into Cyprus One Limited”.
In his final judgement now released, Mansell confirms that Kingsway is responsible for the advice and owes compensation.
He says: “I appreciate it believes Mr M, acting on behalf of a different regulated business, was responsible for advising Mr B to invest in Cyprus One Limited.
“Kingsway has provided evidence Mr M arranged such an investment. But this relates to a different customer, not Mr B. And it took place several months after Mr B made his investment. So I don’t think this has a bearing on this case.”
He adds: “Kingsway has referred to several similar complaints reviewed by this service, involving itself and other businesses. But while I’ve noted these, I don’t think they are material to this complaint.
“The circumstances and factors applying to each complaint are likely to be different, and I’ve considered Mr B’s complaint on its individual circumstances.”
Kingsway has been ordered to pay £500 for the trouble caused and should calculate fair compensation by comparing the value of Mr B’s pension if he hadn’t transferred, with the current value of his Sipp.
A spokesman for Kingsway tells Money Marketing: “We are not in a position to respond as we are seeking advice.”