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.