View more on these topics

IFA to pay up to £150k after investing 90% of client pension into Harlequin

An IFA has been instructed to pay up to £150,000 in compensation for the advice it gave a client to transfer their pension into an unregulated overseas property development.

In the upheld Financial Ombudsman Service ruling  Mrs P complained about the advice she was given by Professional Intermediary Introducers Limited to invest around 90 per cent of her pension in Harlequin Property.

In May 2011 Mrs P met with the adviser, an authorised representative of Professional Intermediary Introducers, to discuss her pension requirements.

Mrs P had a personal pension with a value of around £110,000 that was transferred to a Sipp in September 2011.

In October 2011 £96,000 was invested in Harlequin Property which subsequently failed.

A FOS adjudicator looked into the complaint and he recommended it should be upheld as Harlequin was an unregulated investment and came with significant risks such as illiquidity.

He said it was clear Professional Intermediary Introducers was responsible for the advice to switch the personal pension plan to the Sipp in order to invest in Harlequin.

He added he was not persuaded Mrs P’s investment experience was such that it was suitable to invest the majority of her personal pension in a single asset class with an overseas property development:

The adjudicator said investments such as Harlequin were only suitable for a relatively small proportion of an experienced investor’s portfolio… between 3% and 5%:“Even if Mrs P was an experienced investor it wasn’t suitable to recommend investing over 90% of her pension into Harlequin Property.”

Professional Intermediary Introducers disagreed with the adjudicator and made a number of comments.

A different adjudicator considered these arguments, reviewed the case and agreed with the previous adjudicator’s recommendation of how the complaint should be settled.

Professional Intermediary Introducers disagreed again and asked for the complaint to be reviewed so it was passed on to ombudsman Keith Taylor.

He says: “I agree with the adjudicators and uphold this complaint. The adviser was under a duty to act in the best interests of Mrs P. I’m not satisfied that Mrs P selected this Sipp and the Harlequin investment without advice. The Sipp could not be recommended in isolation from the proposed investments.”

Taylor instructs Professional Intermediary Introducers to pay Mrs P £300 for the impact on her retirement planning and compare the performance of her investment with that of the benchmark below.

Professional Intermediary Introducers should take ownership of the illiquid investment by paying a commercial value acceptable to the pension provider.

This amount should be deducted from the compensation and the balance paid as set out above in the table.

If the business Professional Intermediary Introducers cannot buy the investment, it should pay an amount equal to five years of Sipp fees based on the current tariff.

Taylor adds: “I’m satisfied that the adviser knew that Mrs P intended to invest in Harlequin and ought to have advised against it. It was not suitable for her or in her best interest to invest almost all her personal pension into this unregulated collective investment scheme. It was a high-risk investment with potential liquidity issues as the adjudicator has said.”

Professional Intermediary Introducers said it was reviewing the decision but would not comment at this stage.

Recommended

Portfolio-Bonds-Investment-Business-700x450.jpg
2

Adviser to compensate over Lifetime Sipp Harlequin investment

Advice firm Lansdown Place Financial Management must compensate a client who complained about the transfer of their pension into a Harlequin fund through a Lifetime Company Sipp. A Financial Ombudsman Service ruling says Lansdown Place should not have processed the transfer into the unregulated investment. In 2012, Mr T invested £30,000 of his Sipp into Harlequin […]

Home-House-Money-Property-700x450.jpg
4

FOS penalises adviser over Harlequin Sipp property investment

The Financial Ombudsman Service has told Kingswood Financial Advisors to compensate a client over a Sipp investment in an unregulated Harlequin property fund. The case concerns Mr B’s complaints about the advice he received regarding two unregulated investments: one into a Harlequin property fund and the other into Green Oil. The ombudsman’s ruling relates to […]

4

Steve Webb: Where longevity conversations go wrong

In a world of pension freedoms, longevity risk falls on the individual. Clients must realise they will likely live longer than they think Mortality is not the nicest topic of conversation, but there is plenty of evidence that if clients do not have a realistic picture of how long they are likely to live, they […]

Globe-Global-World-Map-700x450.jpg

Government bond outlook video 2018

RLAM’s Head of Government Bonds, Paul Rayner considers 2018 prospects across UK and international government bond markets. Watch the video here Past performance is not a guide to future performance. The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. They can review it all they like, but other than a JR, the FOS decision is final.

  2. @PC – you make a good point.

    I think what’s disappointing for the customer is the time it will have taken and the continuing uncertainty.

    Professional Intermediary Introducers will have known from the start that this complaint would be upheld and yet sought to drag it out as long as possible causing more stress and anxiety.

    FOS need to do more to speed up this process as two years or more to reach a decision is very unfair on everyone involved.

    • I agree with you Chris. We have just had to be involved with a case going to FOS which one of my (then) trainees brought to my attention saying he didn’t think what had been done was good advice and looked like order taking on a DB transfer early vesting 6 months before NRA in March 2015 by an adviser like me who didn’t have DB transfer permissions and of course due to the date, didn;t have to! I agreed it looked like bad advice and order taking when most other advisers would advise NOT to transfer. Checked with another adviser if he thought the same as me before asking the firm who had advised to get theri external compliance company to look at the case and see what they thought before anyone made a big deal about it, they prevaricated and didn;t get teh case looked at so our client made a complaint, timescales for complaint not followed by the firm and emotional pressure put on the client even calling unannounced at their home! 9 months later adjudicator agrees the advice was flawed and directs firm to make good by 9th Jan or appeal to full Ombudsman, firm says due to XMAS break they need another week and now they have said they don’t accept the decision, despite the fact everyone else thinks the advice was *rap, just order taking. The only silver lining is that whilst it was bad advice, it wasn’t to invest in *rap like Harlequin!
      The FOS system appears broken to me for both consumers and advisers as it appears all adjudications are appealed as a matter of course, while some cases which actually go as far as an Ombudsman and are decided against a firm look unclear when you read the DRN (a small proportion I accept as I agree with a good 80% of DRN’s, but any injustice is still injustice)

      • Oh and to add insult to injury, the adjudicator left the FOS between me speaking to them 2 weeks ago and the refusal to accept the FOS decision by the firm, so no continuity for the client on getting their case resolved.

  3. It is worth downloading the decision. Ref: DRN0330548

    The order taker, sorry meant professional independent financial adviser was at a meeting where Harlequin investments were being promoted and there appears to be a question over whether advice was provided.

    Insistent client maybe, the decision isn’t clear, but under what circumstances would a professional independent financial adviser recommend a client place 90% / £90k of their pension into this type of investment. Cash savings £160k and Share portfolio of £245k both jointly owned with husband. Not exactly a balanced portfolio.

    Interestingly the award also included £600 for the client to seek advice on how to invest the pension funds from another adviser. £600 for a pension pot of £100,000 plus – 0.6% of the fund value. Shows how much FoS value financial advice

  4. As ever, does PII’s PII cover recommendations to invest in an unregulated scheme such as Harlequin? I’d bet a fair few quid that it doesn’t, so this verdict may well break them. What prospect then of the victim being properly compensated other than by the rest of us via the FSCS?

    And, equally to the point (assuming PII didn’t hold the requisite PII cover), why didn’t the FCA insist that it must?

    • The PI cover issue is a serious issue for all concerned. PI insurers will simply refuse to cover all claims where they know a claim is coming around the corner. There is nothing that the FCA can really do about it. It cannot change the unsatisfactory nature of claims made basis coverage without breaking the PI industry. My guess is that when this advice was given, it was insured but when the claim was made, it wasn’t – a totally unacceptable situation for everyone.

  5. Excellent news!

    I am awaiting a decision in a similar case.

    My loss is close to half a million.

    The financial services firm involved, which is still operating and has a posh website, has been shamelessly lying and forging papers for the past few years.

    I sincerely believe I will get justice in the end but the experience and the stress has resulted in my premature old age and so much pressure and stress on my dear wife.

Leave a comment

Close

Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com