A Lancashire-based financial adviser has been fined £28,000 for failing to advise clients of the risks associated with certain investments.
The FSA says the firm, Legacy Financial Planning, also failed to make adequate records to demonstrate the suitability of its advice.
An investigation of Legacy's business found the firm had breached Principle 9 by issuing suitability letters that did not properly explain the reasons for making a particular recommendation and failed to maintain records to demonstrate the suitability of its advice.
The FSA also found the firm to be in contravention of Principle 7 by providing inadequate documentation to customers.
Suitability letters failed to disclose risks and disadvantages involved in certain transactions. In addition, the firm's Menu failed to properly compare their commissions with the market average.
"Communicating with customers in a way that is clear, fair and not misleading is an important part of treating them fairly, particularly in areas such as long-term savings and pensions, where the wrong decisions could lead to hardship in retirement," says the FSA's head of enforcement, Jonathan Phelan.
The FSA found that, in 13 of 20 files it reviewed, the suitability letter did not contain a summary of the main consequences and any possible disadvantages of the transaction.
It says in four cases the firm recommended customers surrender their ISA savings or investments in OEICs or unit trust schemes to invest in investment bonds without explaining the tax implications of doing so.
In another example relating to pensions advice, the firm provided one customer with an illustration demonstrating the benefits from a pension written to the age of 83, even though the customer's chosen vesting age was 75.
Legacy Financial Planning agreed to conduct a past business review and chose to co-operate with the FSA at an early stage, meaning its fine was reduced by 30%.
Contact: John Bakie, Tel: 020 7484 9805, e-mail: [email protected]IFAonline
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