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FOS rejects complaint against HSBC over £9k Sipp commission

The Financial Ombudsman Service has rejected a complaint from a former HSBC customer who claimed the £9,000 commission he paid for a pension transfer covered ongoing advice.

The customer, described by the FOS as Mr S, arranged a self-invested personal pension plan through HSBC in January 2010 with regular monthly contributions of £5,000.

Commission of £9,000 was paid to HSBC, which was deducted from the Sipp over 12 months.

Mr S claimed the commission covered ongoing and initial advice. He says when he approached HSBC to carry out a further transfer, and was told the bank was no longer undertaking pension transfer business, he was therefore unfairly forced to incur additional costs through another adviser.

He also claims he lost money as a result of HSBC errors. The bank has offered £1,000 in compensation, which he rejected.

Mr S says he was told the initial commission on his Sipp would cover all future advice, and that HSBC provided subsequent advice without a charge, which he says demonstrates the commission was intended to cover future advice. Mr S says he is entitled to a full refund of the £9,000 commission.

However, documentation from the time indicates the commission was only in respect of the initial advice.

Ombudsman Terry Connor says: “In the absence of any documentation from the time which would support the verbal assurance which Mr S says he was given, I am unable to conclude that any contractually binding agreement was in place to provide ongoing advice without further charge.”

He adds: “In my opinion, HSBC’s decision to stop offering advice on pension transfers was a legitimate business decision.

“I appreciate though that this caused Mr S considerable inconvenience as he needed to seek advice from a different adviser in respect of the further pension transfer he wished to implement. However, I consider that it is more likely than not that had HSBC provided this advice they would have charged a fee or received commission.”

He says it would therefore be “inappropriate” to recommend the initial commission be refunded.

Connor says that although initial commission of £9,000 is “significant” in the context of monthly contributions of £5,000, he is not persuaded that Mr S only accepted the cost because he had a “reasonable expectation” that he would receive future advice from HSBC at no extra cost.

The FOS rejected the complaint, concluding that HSBC’s offer of £1,000 compensation is “fair and reasonable”.


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There are 13 comments at the moment, we would love to hear your opinion too.

  1. E L Wisty (an only twin) 19th August 2014 at 10:42 am

    Based on the information provided, this appears to be a well thought out and fair decision, which is based on the indisputable facts of the matter.

    I agree that that £9,000 commission on first year total contributions of £60,000 does appear somewhat expensive; although we don’t know how much work was involved in establishing the arrangement.

    Finally, one can only hope that a move to fees will only help focus both parties’ concentration on their respective contractual obligations.

  2. FOS dirty crooked barstewards – I was fined £18.000.00 over £1.000.00 commission. Absolutely no backbone to fight the big boys and to hell with the small broker and I offered £1400.00 compensation

  3. @ L Wisty

    £9k for £60k = 15%. IF this is not daylight robbery then there is no such thing. No matter what was involved I cannot imagine this being justified. How is it even approaching cost effective?

    I have a lot of sympathy with the post from John Crisp. HSBC ripped off someone who came to me for advice. Flagrant – but the FOS found in favour of the bank.

    I wonder why the regulator hasn’t looked into this – Fair? TCF?

    It really does begin to look as if there is one law for the big and another for the small.

  4. I agree that a more transparent RDR fee charging structure should stop this misunderstanding – £x for the advice and the £x per year for ongoing service of the advice.

  5. E L Wisty (an only twin) 19th August 2014 at 1:04 pm

    @ Harry Katz

    Apologies, I was being uncharacteristically understanding and balanced. It won’t happen again.

    Come the revolution, we can put all of this right.

  6. Christopher Petrie 19th August 2014 at 1:04 pm

    A useful point in the judgement was the client couldn’t prove his allegation about ongoing service because the paperwork didn’t offer it.

    Reasons Why letters help advisers not just clients.

  7. If the client in question had saved up those £5k’s each month and made a lump sum investment after 5 years, how many would have charged 3% and not a single question would have been asked?

    Am I missing something or is the key point the fact it was a regular contribution of £5k per month not the most important? To be fair we don’t know the clients age but if she say made those contributions for 10 years + all of a sudden that 15% is nowhere near that figure!

  8. when are the great British public going to stop going to banks they only act in their own interests

  9. But if she had saved her £5k’s for 5 years and made a lump sum contribution and the adviser charged 3% there wouldn’t be any issue. The key is that she was making regular contributions that could have continued for many years. e.g if she was 10 years from retirement the effective charge would only be 1.5% (assuming she paid in until retirement) which doesn’t sound a bad deal…

  10. Most mobile phones can record as MP3 files. We do and the recording of a former client in 2007 was how we defended successfully a claim as we could prove we had told the former client what she claimed we hadnt. It will only be a matter of time before consumers start recording the meetings and are able to prove that what is said in a suitability report bears little resemblance to what is told to the consumer in a LOT of cases I suspect.
    We do what we say for clients and can prove it and that includes client preferences which may be slightly at odds with my recommendations.

  11. This just goes to prove that the consumer trusts what the adviser tells them and rarely fully engages with the suitability report, which is purely a backside covering excercise. As such, it really must once again be a case of my word is my bond and the evidence of that can easily be proven nowadays by recording what is said rather than what is THOUGHT to have been said or what has been put in a report AFTER the event.
    I suspect the consumer WAS told that advice related to the regular contributions and would cover the initial and future advice on that level of regular premium, but not on anything other than that, so it is probably somewhere between what the consumer thought. £9k is certainly excessive for this especially bearing in mind it was in 2010 when the RDR intentions on charges etc were VERY clear and this certainly wasnt in the spirit of what by then was only a matter of 3 years away!
    This was a pension transfer, not regular premiums so WHY was the commission paid out over 12 months if not to deceive the consumer over the true cost. What was the logic for the deductions over 12 months rather than a one off initial otherwise?
    Whatever happens a £9k commission or fee on a £60k transaction is pretty much unjustifiable, even if it was coming from an occupational final salary transfer, but then the article is not that cler as it talks about a transfer as well as regular payments of £5k per month…..
    Think I might read the FOS decision before commenting anymore, just in case I am disagereing with the FOS decision when there is more to it than has been reported.
    Anyone know the FOS decision number so I can find it on their website?

  12. FOS Decision No 2304540 – A commercial property purchase was involved so this isn’t quite what it looks on the surface from the article. The Ombudsman agreed HSBC were at fault, just not with the level of quantum the consumer was seeking, they were looking for 11k compensation where HSBC had earnt £9k commission and HSBC had offered £1k compensation for errors and distress and the FOS agreed with HSBC figure.
    Personally I don’t agree with the 11k or the 1k figure and I have had a client loose an FOS decision in similar circumstances against a bank i.e. where the report said one thing and the client said the adviser told them different and left info off the fact find which I was aware of BEFORE they became my client. The FOS overlooked the consumers statement that they were saving for “pocket money” to retire in France and allowed the adviser to arrange a single premium to an ISA, OEIC and Bond when a single to her pension based on RU64 would have been more suitable and no justification other than than client said their employers GPP firm handled her pensions and she was looking for “investment advice” for inherited money was used as an excuse for NOT advising on pensions and the FOS allowed them to get away with that.

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