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FOS penalises Intrinsic over Sipp transfer to Harlequin

Financial advice-planning-advice-cashflow-analysisThe Financial Ombudsman Service has ruled against Intrinsic Financial Planning over a client who switched his personal pension to a self-invested personal pension in order to invest in Harlequin.

Mr A complains that he received unsuitable advice from an appointed representative of Intrinsic to switch his personal pension to a Sipp.

When the transfer was made Mr A invested all of the fund into unregulated collective investment scheme Harlequin.

An investigator looked into the complaint and thought it should be upheld as Mr A signed declarations that made clear that the only advice the appointed representative gave was to switch his personal pension to a Sipp.

However, guidance from the FCA said that consideration must be given to the intended investments to be held within the Sipp so if the investments are unsuitable then so is the advice.

The ruling says it is clear from the suitability report for the Sipp that the appointed representative knew Mr A intended to invest in Harlequin.

The investigator then concluded that the advice Mr A received was unsuitable, said it would be upsetting for Mr A to lose his entire pension and that Intrinsic should pay £500 in recognition of this.

Mr A agreed with the investigator but Intrinsic did not and argued Mr A did not receive advice from its appointed representative and the advice was provided by the adviser’s unregulated company or alternatively a Harlequin agent.

Intrinsic added it has no relationship with either the Harlequin agent or the adviser’s nonregulated company and did not receive any commission from Harlequin.

However Intrinsic accepted that its appointed representative advised Mr A about his Sipp.

In his ruling ombudsman Michael Stubbs refers to a provisional decision on this complaint in November 2017 that refers to what the FCA said about the scope of Sipp advice in 2013.

Then the FCA said: “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.”

Stubbs goes onto explain that while the FCA’s position post dates the advice he considers this a clarification of existing obligations on advisers rather than an imposition of new obligations.

Although Stubbs accepts Intrinsic’s appointed representative did not give any advice about Harlequin he reasons it should have done more.

He says: “While specific advice about Harlequin couldn’t have been given I consider the adviser could have given general advice about the advisability of investing all of an investor’s pension provision in a single unregulated investment.

“In my view the adviser could and should have advised against the transaction without straying into giving regulated investment advice about Harlequin (regulated investment advice is advice about the merits of buying or selling a particular investment).”

To compensate Mr A the ombudsman says Intrinsic should pay £500 for the upset caused and obtain the notional transfer value of Mr A’s previous pension plan if it had not been transferred and the Sipp’s transfer value.

It should then pay an amount into Mr A’s Sipp so that the transfer value of the previous plan is increased to equal that of the Sipp’s transfer value.

A spokeswoman for Intrinsic says: “Intrinsic is focused on ensuring it delivers good customer outcomes through high quality advice. We appreciate the complexities of this case and will abide by the ombudsman’s decision.”

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