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FOS tells Lighthouse to refund advice fee

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The Financial Ombudsman Service has told an adviser to refund a client’s £970 advice fee and pay 8 per cent interest, plus £500 compensation, after it refused to sign a form declaring advice had been given.

In the case, a client referred to as Mr B was advised by Lighthouse Advisory Services to transfer two existing pensions into a Sipp.

But when he chose to use a different Sipp provider to the one Lighthouse recommended, it refused to sign the appropriate form and declaration confirming it had given advice.

Lighthouse wrote to Mr B on 25 July 2017 with a report containing its recommendations for the transfer of his two pension plans into a Sipp.

It recommended Mr B transfer his two existing pensions into a Sipp with company “A” and stated the initial and ongoing fees for the transfer. Lighthouse’s letter confirmed it was “authorised to advise” Mr B on the matters covered in the report.

Mr B broadly agreed to proceed with Lighthouse’s recommendation but instead of transferring his pensions to A, he wanted to transfer them to a different provider, which the ombudsman refers to as “H”. Mr B’s research found H had lower fees.

Mr B agreed a fee with Lighthouse for the work it had done. When he then made requests to have his two pensions switched to H, both asked him to provide confirmation advice had been obtained. However, Lighthouse refused to sign the relevant form, saying it had not given advice to transfer.

The case was subsequently referred to the ombudsman as an agreement between the parties couldn’t be reached.

Ombudsman Alessandro Pulzone says: “The key dispute in this case is that Lighthouse accepts that it gave Mr B advice to transfer his pension in line with Section 48 of the Pension Schemes Act 2015.

“But it refuses to confirm that it has given Mr B advice for the purposes of a transfer which, it says, it didn’t specifically advise on. So the question is whether there’s any requirement for a consumer to follow the advice provided by an adviser, in order for that adviser to confirm that advice has been provided.”

Referring to section 48 of the Pension Schemes Act 2015, Pulzone decided there was no obligation on the advice being followed and no requirement for Lighthouse to specifically advise on where Mr B was intending to transfer his pension to, before it signs or provides confirmation.

Lighthouse disagreed with the ruling, stating that when advising on a pension transfer, FCA rules state the advice must take account of the proposed destination of the transfer funds. It maintained that signing the confirmation without completing a new report (which would attract a fee) taking into account Mr B’s proposed Sipp, would be in breach of FCA rules.

Pulzone reconsidered the case but concluded that it wasn’t fair and reasonable for Lighthouse to charge Mr B the advice fee yet decline to confirm that it provided him with appropriate independent advice.

His final decision was to uphold Mr B’s complaint and that Lighthouse must repay the fee, plus interest and compensation for “trouble and upset”.


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There are 34 comments at the moment, we would love to hear your opinion too.

  1. So presumably if he’d transferred it into some
    Mickey-Mouse SIPP with a sign-off from Lighthouse, and then seen his transfer funnelled into some dodgy bonds and worthless AIMS share a la BlueInfinitas and others, he’d have claimed against Lighthouse. Some FOS adjudicators really need to wake up to the way regulation is being used for arbitrage.

    • Spot on Neil

      FCA CP18/7 final rules and guidance 3.2 “When advising on a pension transfer , the advice must take account of the proposed destination of the transfer funds if a transfer proceeded. This includes both the proposed scheme and proposed investments in that scheme.”

      Do FOS really not know this?

      • Indeed so. The Lighthouse AR firm advised transferring into a specific SIPP on which they had (presumably) undertaken the appropriate DD, not any old SIPP of the client’s choosing, through which they would have had no influence over the investments chosen. The firm was quite within its rights to refuse to sign a piece of paper confirming they’d given advice on transferring to a SIPP that they hadn’t recommended (and which they might well have advised strongly AGAINST transferring into).

        As a matter of interest, what was the adjudicator’s response to Lighthouse having pointed out that FCA rules state the advice must take account of the proposed destination of the transfer funds? Of this, there seems to be no mention.

        For the future, I imagine that Lighthouse (and anyone else) will, in its Client Agreement that the client is required to sign (in theory before any work is embarked upon), make absolutely clear that they will provide no assistance whatsoever in facilitating any course of action that deviates from their specific recommendations. The crunch point is that Lighthouse DID NOT give Mr B advice to transfer his two PP’s to any SIPP other than the one they had deemed to be most suitable. To this, the ombudsman appears to be oblivious.

      • Nick, did you read the FOS DRN before commenting or just the MM article? I think if the latter, you might reverse your stance to agreeing with the FOS once read.

  2. This, clearly, indicates how the odds are stacked against the adviser in this industry.

    Not only has the adviser lost their remuneration for the time spent on the client’s case, they have also had to pay 8% interest and lost a further £500 to this client who, on the face of it, seems like a complete chancer who has succeeded in a blatant rip off, aided and abetted by the FOS.

  3. Nicholas Pleasure 10th December 2018 at 9:54 am

    Neils comment above is absolutely correct. Also, for Lighthouse to sign the declaration it would have to conduct due diligence on the new SIPP provider (assuming that it is one that the firm does not regularly recommend) and that costs time so requesting a further fee is correct.

    Also, why is interest still added at 8%? It makes the FOS look entirely out of touch with financial reality, as well as being deeply unfair.

  4. As stated, was Lighthouse being “fair and reasonable” apparently not, which appears to be the new mandate, forget about regulation and the law,.

    Lets just be nice to people.

  5. So an adviser and the SIPP firm have to take into account the intended investment? Well that’s what the FCA says, determined we provide client specific advice. Yet the FOS is now saying “to transfer or not to transfer” is enough advice, irrespective of where the client chooses to take the funds. So let’s throw out the TVC since we dont know where the funds might end up and don’t bother with the APTA since we can’t be certain the figures will be relevant to the client’s whimsicle quest for cheap fees. Some degree of consistency would be helpful; is it too much to ask that the regulator and the ‘judge and jury’ at FOS actually adopt the same rules.

  6. I don’t know why they don’t just sign the form to say they gave advice, the provider form does not ask that the advice was to transfer to any specific firm, just that advice was given. It doesn’t even ask if the client is going against the advice. Providing they did not facilitate the transfer to “H” then they have got nothing to worry about, he wouldn’t even be an insistent client.

    • Or alternatively provide confirmation that they’ve advised him to transfer to pension provider A, so that the ceding schemes are on actual notice when H comes along that this wasn’t the advice.

  7. A warning to us all, make sure you are being paid for your advice whether or not it leads to a product implementation.

    I used to believe that a “client” who did not follow my recommendation was not a client , and we should not be forced to accept insistent clients, this ruling suggests otherwise.

  8. Lol. I love the way staff at FOS are quoting Pension Scheme Acts and other legal text as if they are qualified to comment on the content. Bunch of amateurs.

    IFAs spend too much time protecting themselves from FOS, when the focus really should be upon not getting anything referred to them in the first place. Because if it goes to FOS, you will lose. Even if you win, you lose with the amount of time involved.

    • Actually quite often the FOS staff are MORE qualified than we are.The one currently looking at a case for anew client of mine who was (in my opinion) poorly advised to transfer a guaranteed income to access a PCLS of 1/10th of her fund value 6 months before her NRA is more qualified than I am and the adviser who “order took” to move a pension for a client who wanted a lump sum, which could have better been accessed from her husband#s PPP without sacrificing her own DB scheme. The proof will be in the pudding once we see whether the FOS higher qualifications actually apply common sense or not.

  9. I tend to agree on the face of it with all bar one of the commentators here. I need to read the final decision before I comment too much however as often the typed article varies in tone from the actual DRN.
    I wait with baited breath for Rory Percival’s comments on this case and his attempt to explain why this doesn’t just re-inforce my claim (and that of Mal K and perhaps others) that the F-pack system is morally corrupt itself.

  10. DRN1488449 – I’ve read the report now and I agree with the FOS decision.I suggest everyone else commenting on reading teh article alone (as I did) reads the actual FOS decision.
    I once again look forward to Rory Percival’s comments on this as whatever he thinks of me, just because I disagree with some of the things he and his former employer says and I may be a bit of a PITA, doesn’t mean I don’t value his opinion and don’t read and take on board what the FCA says.

    • I agree too. And, speaking as a former CF10 and 11, I’m amazed Lighthouse held the line it did throughout this case. If I were them, I’d be anxious that doing so has put their heads above the parapet with:

      (1) the FCA, because if I were the regulator I’d be curious to understand why they thought what they did, especially in the light of very sensible arguments to the contrary, and

      (2) HMRC, because my working assumption from the Ombudsman’s findings quoted below is that the “advice” fee is seriously lowballed as a VAT dodge…

      “My role isn’t to decide what Lighthouse’s fee structure should be. But I would expect that the
      possibility that a client might not want to go ahead with the recommendation was something
      to have been taken into account by Lighthouse in deciding what the advice fee would be
      relative to the implementation fee.”

  11. @Emma Lunn – do you truly believe your article was clear, fair and not misleading? Was it just “click bait”?
    Was the article a fair reflection of the FOS logic and decision?

  12. Many (including Lighthouse’s defence) seem to be trying to conflate the FCA rules and guidance with the TPA’s requirement for schemes transferring a member’s DB entitlement to get confirmation that the member has taken regulated advice.
    As Adam Smith identifies, Lighthouse were perfectly entitled to sign these declarations whilst also confirming that the member had decided to transfer to a different arrangement to the one recommended by them and they took no responsibility for the destination arrangement. I know of several firms that already do this.
    They could also have written a follow-up to the client confirming that they did not recommend the scheme he was looking to use and therefore could not take any responsibility for it.
    The report also does not seem to make clear whether the advice fee charged by Lighthouse, and paid by the client, included implementation as well as the advice report. If it didn’t and Lighthouse expected to charge an additional fee to implement the recommended transfer, then they were on even dodgier ground!

    • I don’t agree with your last paragraph Kevin. We charge a basic advice fee (‘BAF’) for advice regardless of whether or not the client asks us to implement the advice given. It’s non-contingent which means we’re being paid for pure advice regardless of whether or not a product is sold or transfer effected. It also allows us to factor in any extra work needed up front. Equally, we can and often do reduce the BAF for simpler jobs. Another benefit of this is that it filters out the timewasters, brain-pickers and assorted freebie-merchants. Our CADs spell out the component parts of our charging structure so I don’t feel we are in any way whatsoever on ‘dodgy ground’. As I read this, Lighthouse is charging a £970 BAF and 2% for the implementation whereas our typical charge is a £695 BAF plus 1% of the fund net of TFC. Everyone has their own structure and model, and that’s their business. However, anyone operating a model that does not involve a non-contingent BAF – doing investment/pension recommendations on spec in effect – is inviting freeloaders to waste their time. As I say, that’s their business and good luck to them, but I learned the hard way. the only people we spend time on writings recs are people who are committed to paying for our time. No pay, no play!

      • Hello Neil. Have you read the FOS DRN? It would be useful to know if you agree with the FOS decision (rather than the MM article) once read.

        • I have Phil and yes I do. It comes across a bit as ‘my way or the highway but I’ll keep your cash anyway.’ If I’d been that worried about it in their shoes I’d have just refunded them and said “go elsewhere”. I suspect though that Lighthouse were worried about being caught with the kind of scenario I outlined above and I don’t blame them. Where they went wrong was to try and hang on to the fee. In a situation like that, it’s never worth the hassle. I was once asked to advise on a large-ish SSAS but a few meetings in it was obvious that it wasn’t going to be an enjoyable experience. Absolutely everything was argued over, starting with the mundanities of the fact-find, and the people concerned were obnoxious. So, I emailed politely saying in essence “go away, you’re rude, life’s too short, I’m waiving all time charges accrued so far, goodbye!” The funny thing was that they came back, said they “didn’t realise they’d been rude and could we start again?” The answer was no. I figured if somebody could be that bad without realising it, I figured they were too thick to be safely adviseable. Technically I was down about a grand in time wasted but I was happy enough to get rid of them and still kept a good relationship with the accountant who referred me in. (He understood – he’d put up with it for years. More patience than me, obviously!)

          • Two points Neil:-

            1. What’s wrong with my way or the high way? Facilitating a course of action different from what’s been recommended is stepping into Insistent Client territory which, as we know, the FOS does not accept as absolution from the consequences of a bad choice on the client’s part. If you, as an adviser, facilitate any course of action on whatever terms, YOU will be held responsible for the outcome.

            2. The fee was charged and paid for specific not generic advice and nowhere did Lighthouse state You can pick out just the bits you fancy and we’ll help you do whatever you want regardless of whether or not that course of action conflicts with what we’re recommending.

          • @Neil – Thanks for that, it’s reassuring that not only do we both agree with the FOS decision, but that your solution is very similar to mine. Give them the money back and tell them to Foxtrot Oscar as they are just not worth the air they breath.#
            Ant complaitn after fully refudning any fees I would suggest the FOS should reject without further investigation due to being simply vexatious and much as I know the F-pack don’t like us threatening it, but if or when I get a fraudulent or vexatious complaint, if I am legally able to, I will take the individual to the cleaners, even if that means the FCA then want to try and do the same to me.

          • @Julian. You’ve missed the point. Read the DNR again. (Assuming you read it in the first place.) I mistakenly relied on the clickbait story before reading the DNR. Won’t make that mistake again.

            @ Phil – totally agree re’ suing vexatious complainants. Some months back I told a CMC that’s trying it on, that if its client now makes statements which contradict what he told us 13 years ago when we sorted his Interest Only mortgage, we’ll report him for mortgage fraud to the lender and the police. And I mean it. If the FCA thinks I’m sitting in a coconut shy for CMCs to throw rocks at they are kidding themselves. I’m pretty sure the law will decide that certain rights are inalienable, one being the right to complain to law enforcement if one feels one is the victim of a crime or that another is or has been.

      • Hi Neil
        I’m not criticising the concept of a BAF (as you term it) and a separate implementation fee, as it is a very valid model and necessary for DB transfers and other safeguarded rights cases.
        What I was saying is dodgy was Lighthouse’s insistence that it would not sign the relevant provider’s declaration unless the client also agreed to them implementing the recommendation, when under the rules this confirms only that the member has taken relevant financial advice and has nothing to do with what the recommendation was.
        It is simply not ethical to provide and charge for advice, and then to try and effectively blackmail the client into accepting your recommendation by refusing to sign the advice declaration unless s/he agrees to implement your recommendation for a further fee!!!

        • I agree with you Kevin, especially after the consumer had tried to get his new SIPP provider (H I suspect is Hargreaves Lansdowne don’t you?) to accept a copy of the suitability advsie as confirming that advice to transfer to a standard DC SIPP had been provided, but they said they’d only accept it if Lighthouse confirmed that teh individual had been ADVISED to gorego guaranteed annuity rates rather than insisted on foregoing them.
          Personally I think Lighthouse got off quite lightly.

        • I do agree that if you have given advice you can hardly refuse to sign a declaration to that effect. What was wrong with them getting a reciprocal declaration signed by him to say he’d been advised to do one SIPP but was insisting on doing another? We’ve just had a similar one with a client who’s insisting on cashing his entire pension now despite the fact that waiting until 6 April would save him several thousands of pounds. Some people just cannot take advice.

          • If a client wants to pursue a course of action at variance with the advice actually given and confirmation of that advice having been given is required for the transaction to proceed (via a different channel), the sensible course of action is for the adviser to tell him to supply the relevant party/ies with a copy of the SR. Said party/ies can then do with that what they will.

            Should they facilitate a course of action contrary to or at least at variance with what’s been advised, any liability for the consequences of a bad outcome that may arise at a later date will surely fall to them not to the adviser. Or is that too logical?

    • Yes, and the FCA DRN report clearly explains these weren’t DB schemes, but I think 3 x DC pensions at least one of which had guaranteed annuity rates. they were happy to reccomend a transfer out of the gtted anuity rates, when I woudl have thought “insistent client” out off the gtteed rates would probably have been more likely….
      When you look at it like that, it was VERY expensive switching advice.

  13. With the information available in the article it’s impossible to reach any conclusive decision of who is correct.

    However I would note that Lighthouse did provide advice, then refused to sign the form to say the client had received regulated advice. That is definitely not being “reasonable”.

    Nowhere on that form does it state what the advice was, nor does it state where the advice suggested it be transferred, if it was a recommendation to transfer.

    Nowhere does it mention that Lighthouse refused to carry out the transfer to the provider of the clients choice (which they are perfectly within their rights to do), only that they refused to sign to say that he had received advice, which he clearly had.

    I think many are getting confused about what is what. Any client is free to disregard any advice they receive, but were he to transfer to the provider of his choice and then complain, he would not have a leg to stand on, because he did not take the advice given.

    A simple letter, covering this part, coupled with signing the form to say he had received advice and Lighthouse would have gotten paid, the client would have been happy and the dispute would never have occurred, plus lighthouse would have had their butts fully covered.

    As such I have little sympathy for them.

    • @Duncan, as you say “With the information available in the article it’s impossible to reach any conclusive decision of who is correct.” that is why I do question whether Emma Lunn/MM’s articcel was just click bait without linking and encouraging first reading the actual FOS decision before anyone comments DRN1488449
      I am probably one of the most vocally critical people of the F-pack (posting under my real name), however I publcily state that if I read FOS DRN, I agree with a good 80 to 90% of their decisions which is better than our industry’s FCA findings on DB transfer advice which is at about 50% clearly good advice, about 30% unclear and 20% down right dangerous.
      With the FOS, it is 18% unclear I(they haven’t truly justified their logic for upholding a complaint or rejecting it) and only about 2% that are clearly flawed, but that 2% can put a firm our of business or if the adviser is a sole trader or partnership and the limit rises to £350k, lose you your home without any right to a defence in law.

  14. […] FOS tells adviser to refund advice fee after refusing to sign declaration – The Financial Ombudsman Service has told an adviser to. […]

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