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True Potential ordered to contribute to client’s advice fee

UK-Currency-Money-Notes-20-GBP-700x450.jpgTrue Potential must pay part of a former client’s future advice fee after advising he transfer his pensions to its platform, incurring higher charges and commissions.

True Potential advised the client to transfer his stakeholder pension and his personal pension – worth a total of £134,000 – to its wealth platform.

A Financial Services Ombudsman adjudicator found the pension transfers were not justified and the client’s new financial adviser said True Potential should pay towards the cost of him getting further advice.

The adviser said giving the client suitable advice would take around nine hours at £195 per hour.

However, True Potential did not agree to pay for further advice despite the adjudicator recommending it should pay the client for three hours of advice not nine.

In the final decision notice, ombudsman Keith Taylor agrees with the adjudicator that True Potential should pay the client £585 towards seeking further advice.

He says: “I don’t think True Potential should pay as much as Mr L’s representative says. That’s because Mr L probably would have looked to get some advice about his pension at some point. And any advice would have come at some cost to him and so isn’t wholly down to any poor advice True Potential may have given him.”

Taylor adds: “I can’t say what that advice may cost but he is in a worse position now and True Potential should make some contribution. A contribution of £585 is fair in these particular circumstances.”

True Potential was also ordered to pay the client £250 for any upset and inconvenience caused. It must also put the client in the position he would be in if he was not given unsuitable advice.


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. FOS needs to get into the real world. Taking on a new client for just a small piece of advice takes many hours if only to meet regulatory KYC requirements. You cannot just give advice based on a limited area of a client’s circumstances without first understanding the context in which it is placed. Alarming really.

    • I agree Sam, taking on a new client costs us about £2k. We charge £420 of that at the end of the first meeting (which is at our cost) if the client and we think we can add value and want to work together, but total will invariably be in the region of £2k or more. What about you Sam?
      TP charged a total of £3,700 I believe, which whilst more than we might charge is less than our quoted tariff as we invariably reduce fees as a % as fund sizes get larger.

    • Thanks for the link. I’ve read the case now. As it was a 2015 transfer, why is the FOS referring to commission? Don’t they know it was banned at the end of 2012?
      If the new adviser transfers to any plan other than their original stakeholder ones, then as the FOS said they believe plan A and B were correct, then the new adviser is on notice of an upheld complaint against themselves next.

  2. jonathan gamlin 9th August 2016 at 5:34 pm

    So how many IFAs have switched from a ppp or stakeholder to a SIPP in the past however many years , for what we would think of as justified reasons and hopefully clearly explained . Looks like cue for the next round of claims , where good justifiable advice doesn’t meet the FOS view that cheap is best !

  3. How much of the nine hours needs to be done by an FA, and how much by a Paraplanner or Administrator at a lower rate.

    Besides, if he does a good job there may be follow on advice needed.

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