Nurture Financial Planning must compensate a client for the advice it gave him to transfer a defined benefit pension to a Sipp and invest it in Harlequin property.
In the upheld Financial Ombudsman Service ruling, Mr A is unhappy about the advice he received from Norwich-based Nurture to transfer his deferred final salary pension benefits to a Sipp in order to buy an unregulated overseas property development.
Mr A was introduced to Harlequin by a third party unconnected to Nurture and was then referred to Nurture to arrange a Sipp so he could invest in Harlequin.
In February 2012, the adviser completed a fact find with Mr A that recorded he was unemployed and had used up his capital and savings after being made redundant.
Mr A said he was going through a tough time and was earning very little from temporary employment.
His deferred pension benefits would provide him with an estimated pension income of £8,088 at age 65, plus a tax free cash sum of £3,143 and the transfer value was just under £105,000.
The Nurture adviser was aware Mr A intended to invest in Harlequin and gave advice to Mr A about his pension benefits.
His priorities were recorded as using part of his pension to buy a Harlequin property.
Nurture agreed to give advice on the pension, but not on the Harlequin investment, so it recommended Mr A use the remaining funds to dilute the risk associated with Harlequin.
Nurture said the Sipp was suitable for Mr A because he wanted to buy a Harlequin property and wished to actively manage some of his pension funds up to retirement.
It also said the advice was suitable for Mr A as he wanted to adopt their investment process for the residual fund and wanted to receive ongoing retirement advice.
Mr A received inducements for his investments in Harlequin. He and the Harlequin selling agent agreed part of the commission payments would got to the client.
Subsequently Mr A confirmed to FOS that he approached the selling agent directly to arrange a second investment in Harlequin and said he received another payment for that unit.
In the provisional decision ombudsman Roy Milne ruled in favour of Mr A who accepted the decision but Nurture disagreed.
Nurture pointed out Mr A failed to say he was to be paid a financial inducement and had that been disclosed it would have changed its approach to the advice.
It also said the fact Mr A totally disregarded the advice to de-risk his investments and showed a wilful disregard to any advice that was given to him.
In the final decision Milne says he remains of the view Nurture’s advice did cause Mr A to transfer his pension benefits and invest in the first Harlequin property.
But Milne also says Nurture is not responsible for causing the losses for investing in the second Harlequin property.
Milne adds: “I am satisfied that the advice to transfer to the Sipp was unsuitable. The pension benefits were the only asset Mr A had. He was giving up a valuable guaranteed income in retirement.
“Mr A would be relying on this to provide him with an income. I think that Nurture should have advised Mr A against transferring to the Sipp; and also advised him not to invest in Harlequin.”
To compensate Mr A, FOS instructs Nurture to compare the value of Mr A’s pension benefits, if he had not transferred, with the current value of his Sipp.
Milne says: “I am not asking Nurture to account for loss that goes beyond the consequences of its failings. I am satisfied those failings have caused the loss in question.
“That other parties might also be responsible for that same loss is a distinct matter, which I am not able to determine. However, that fact should not impact on Mr A’s right to compensation from Nurture for his loss.”