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Is FOS data really giving advisers an accurate reading of Sipp complaints?

Michael Klimes takes a look into how Sipp complaints are being handled by the ombudsman

Discrepancies with FCA statistics raise fresh concerns over the collection of complaints information, as pressure on Sipp providers continues

The Sipp industry is still struggling to put the legacy of unregulated investments and dubious “introducer firms” behind it.

Last week, a review of upheld Financial Ombudsman Service pension rulings by Money Marketing found five decisions against one advice firm that had been published since the start of this year alone.

BlackStar Wealth Management, based in the West Midlands, was told to compensate five different clients for the unsuitable advice it gave them to transfer out of pension schemes.

All the clients were advised to transfer out of their defined benefit or personal schemes into a Sipp, where they were then exposed to investments found to be too high-risk.

This large number of upheld complaints against one firm uncovered by a brief search of the FOS database contrasts sharply with the volume of complaints that have been referred to the Ombudsman by the Sipp industry itself over the past 12 months.

A Freedom of Information Act request by Money Marketing to the FCA about its Sipp supervision work found the 22 Sipp providers it questioned had referred 48 investment-related complaints to the Ombudsman in the past year.

That figure stemmed from the data collection exercise the watchdog conducted following its Dear CEO letter to Sipp operators to draw attention to High Court claims against fellow providers Berkeley Burke and Carey Pensions. The low number of complaints reported to the FCA has surprised experts, who believe the real figure may be much higher. It has raised questions about how FOS categorises and processes complaints.

The latest numbers
When asked about the 48 Sipp investment-related complaints, FOS said these would fall more generally under the investments and pensions categories. Those categories are then broken down into complaints about administration, sales and advice, and “other”.  According to FOS’s annual review for 2017/18, it received 5,257 pensions complaints, of which about half, 2,051, were about Sipps. Investments and pensions accounted for 4 per cent of all complaints in 2017/18.

Broken down further, 45 per cent of complaints were about administration, 43 per cent sales and advice, and 12 per cent were other complaints.

In 2016/17, FOS received 5,160 complaints about pensions, of which 1,493 were about Sipps. Five per cent of all complaints in 2016/17 were about investments and pensions.

Broken down, 52 per cent were about sales and advice, 42 per cent administration, and 6 per cent were classed as “other”.

FOS is due to publish its latest annual figures on 15 May, which might shed further light on Sipp complaint volumes. Nonetheless, why is there a discrepancy between the FOS figures for the market as a whole and the sample that was reported to the FCA?

Hunting for explanations
James Hay head of technical support Neil MacGillivray says: “I find it remarkable the number of complaints is as low as 48. Other claimants may be going through the courts to get more compensation.

“Any new claims could be put under the old FOS limit or the new one. The issue is a lot of scams have focused on those with small pots. It has been easy to persuade people who are not financially astute and have seen large transfer values to be scammed.”

Nexus Independent Financial Advisers managing director Kerry Nelson also says the figures collected by the FCA seem too low.

She says: “It is a load of rubbish, if you think of the explosion of unregulated products sold through Sipps in the past 12 months. I do not believe it.

“I know, for instance, that Transact would have had a bunch of complaints related to a firm and a lawyer who has gone after them directly.

“Clients are being exposed to unregulated investments through Sipps. There is still a flow of legacy complaints, with London Capital & Finance being a new entrant in these types of complaints.”

Nelson has personal experience of poor Sipp administration and how this complicates the resolution of complaints. She adds: “There could be an element where Sipp providers have deferred clients back to the original adviser. We have taken on a client purely on the basis to help with a defined benefit transfer complaint. Also, we have taken on five other clients to help them with complaints against a firm that would have all been facilitated by Sipps. The only way companies can get access to these unregulated investments is via the full administered Sipps.”

Law firm DWF partner and head of financial services regulatory Robbie Constance argues the Sipp industry is still trying to work out where it stands in relation to FOS and the FCA on unregulated investments.

He says: “Anecdotally, the number seems low and we believe this number comes from the FCA survey [of Sipp providers after the Berkeley Burke ruling published in October 2018]. Firms who responded probably gave a restricted view of the complaints they have received when filling in the survey.

“The Sipp industry should not take any comfort from these figures but should await the updated annual complaints figures from FOS that break down product types.

“These figures could also show the inconsistent way FOS categorises complaints or, more worryingly, the FCA’s lack of grip on the details.”


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