The Financial Ombudsman Service has upheld a complaint against an adviser for failing to inform a client of his right to cancel an ongoing fee, despite never having advised the client.
In June 2012 IFS Financial Management bought the client book of another firm, David Upshall Financial Management, whose principal was retiring.
David Upshall was not party to the FOS complaint. One client told the firm it did not wish to transfer to IFS, but IFS claims this was never communicated.
IFS sent a letter of introduction to the client on 25 June 2012, who replied on 6 July to say he had given instructions not to be transferred and requesting his records be destroyed.
The client later became aware that IFS had received payment from Skandia in relation to his pension and complained to the firm in September 2013, requesting return of the payments.
The FOS refers to the payments as “trail commission” in its decision, but Skandia says it was an ongoing adviser fee.
In February 2014 the FOS rejected the complaint, saying that it did not believe the client had suffered a loss.
The client then approached Skandia, which agreed to pay him back an adviser fee of £973.27 which had been deducted in August 2013.
In light of this, the FOS upheld the complaint. It said IFS should have replied to the client’s letter of 6 July 2012 informing him he could cancel ongoing payments. It has ordered IFS to refund any ongoing payments, plus pay £100 for inconvenience.
IFS has rejected the decision and requested it go to an ombudsman for a final decision. IFS director Jeremy Miles says the ruling creates a “dangerous precedent”.
A Skandia spokesman says: “Once the customer requested that we cease paying the fee, we did so. Payments to the adviser before that have not been clawed back.”
The FOS declined to comment.