Portafina has been directed by the Financial Ombudsman Service (FOS) to pay compensation to a client for pension transfer advice, despite the firm claiming he was an "insistent client".
The ombudsman said the client - known as 'Mr A' for the purposes of its decision - complained about the advice he received from Portafina to transfer benefits from his occupational pension scheme to a personal pension in 2015.
At the time of the advice, the client was 61, unmarried, unemployed, owned property worth approximately £90,000 and had no further assets.
Portafina rejected the complaint, outlining several reasons why it disagreed with Mr A's views. Among other arguments, the firm said it had provided its advice in a "simple and concise way" and that the recommended investment - the MetLife Secure Income Option -allowed Mr A's pension to obtain a secure income with minimal risk.
Portafina managing director Jamie Smith-Thompson told Professional Adviser: "The MetLife Secure Income Option looks to be a great product for Mr A here. It provides a guaranteed income level, based on taking in the region of 3.5% of total value of the pot per annum, regardless of how the underlying investment performs.
"It achieves this by establishing a ‘Secure Income Base': a virtual fund that is protected from drops in stockmarkets - a guarantee that is surely gaining in value today as we move into a period of more volatile markets and currency exchange rates associated with Brexit."
Portafina also told the ombudsman that it recommend the client should not transfer his pension but that he signed a document saying he was an "insistent client" and was transferring against the firm's advice.
A representative of Mr A had complained to Portafina in February 2018, claiming the advice to transfer his pension was unsuitable for several reasons. One of those reasons, the representative argued, was Mr A was not provided with "sufficient time" to reflect on the advice received. The representative also said Mr A was not made aware of the "inherent charging" associated with the policy.
"Mr A was inexperienced in complex pension matters and was wholly reliant upon the advice of the adviser," his representative said. "He had not been looking to take excessive risk with his retirement planning."
The representative also claimed the plan recommended by Portafina carried higher risk exposure than was suggested at the point of sale and the adviser did not adequately disclose the downsides to the recommended product.
Furthermore, the representative said, Mr A would have considered alternative options had he been made aware of them and needed more time to consider the advice he had received.
'Responsibility for advice'
An adjudicator at the ombudsman concluded Portafina had not acted fairly and that Mr A needed to access his pension benefits to obtain a lump sum to meet "pressing financial commitments".
The advice firm's fact-find said Mr A had wanted to take a tax-free cash lump sum to repay debts. The ombudsman said the advice to transfer the client into drawdown was appropriate but the specfic product was not. The benefits of the product did not justify the 0.7% costs associated with the guarantee, the ombudsman argued.
Portfina, on the other hand, said the client liked the idea of the guarantees that were available with the recommended product.
A second ombudsman agreed with the original adjudicator, saying: "The levels of benefits illustrated didn't represent enough benefit to him to justify those costs.
"Mr A was taking advice from Portafina, and the fact that he chose to follow its advice does not absolve Portafina of responsibility for that advice."
The ombudsman also said it believed Mr A would have invested differently had he had the option to do so. As a result, Portafina has been asked to put Mr A in the position he would be in had the transfer not taken place.
Commenting on what he described as "the key facts of the complaint", Smith-Thompson told PA the FOS had supported the allocation of Mr A's DB pension funds on transfer into income drawdown "because of the urgent need for access to some money to clear debts and he could not expect to draw on his DB pension until age 65 - he was 61 at the time of advice in 2015".
He added: "The FOS complaint was only partially upheld based on the cost of the guarantees which Portafina secured for Mr A based on his desire for reliable, steady income that is not exposed to impacts from investment losses and is ‘100% secure'.
"The Ombudsman ruled that paying 0.7% per annum was too high a charge given the benefits provided by the MetLife Retirement Portfolio ‘Secure income option' - however nowhere did FOS offer a better and/or cheaper alternative product to this one, given Mr A's requirements for guaranteed income and death benefits.
"We believe the Metlife policy was ideal given the fact Mr A needed urgent access to some retirement funds to clear debts and did not have other means to do so as he was unemployed."
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