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Ritchie says snub clients who reject BTL advice

Advisers should drop clients that reject their advice and insist on using their whole pension pots to purchase buy-to- let properties, warns Scottish Equitable pensions development director Stewart Ritchie.

Recommending residential property in Sipps poses a significant misselling risk to IFAs, particularly where heavy gearing is involved and advisers will need to cover their backs when advising clients he warns.

Gearing could leave some investors with 150 per cent exposure to property in their pension funds, building sig-nificant risk into the portfolio, he says.

He recommends at the very least that IFAs get their clients to sign disclaimers should they ignore the advisers’ recommendations to construct a more diversified portfolio.

Ritchie’s warning follows on from Hargreaves Lansdown announcing they will cap their Sipp clients’ residential property exposure at 10 per cent within their own bran- ded Sipps.

St. James’s Place head of pensions Ian Price agrees advisers should always recommend clients diversify but says it is very difficult to impose arbitrary rules across an IFA’s client base saying limits should be set individually.

Ritchie says: “The issue for advisers is to make sure they have covered their backs and the best thing is for the adv- iser to avoid these clients. The concentration of risk would be phenomenal and the chances of it going pear-shaped are significant.

“If it does, the client will say you should have told me not to do this and whose fault would it be?”

Price says: ” It is hard to come up with hard and fast rules for all clients but we will look at property like any other asset class and ensure the client understands all of the advantages and disadvantages of holding it.”

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