Chartergroup Financial Management (CGFM) has been asked to pay redress to an insistent client who was unsuitably advised to transfer his pension to a SIPP and invest in an unregulated carbon credit scheme.
Mr T - as referred to by the ombudsman - complained CGFM gave him unsuitable advice to transfer his pensions to a self-invested personal pension (SIPP) scheme and then to invest in carbon credits - permits which allow a country or organisation to produce a certain amount of carbon emissions and which can be traded if the full allowance is not used.
The complainant, who was a member of a defined benefit occupational pension scheme, transferred the value of his final salary benefits to a SIPP in 2013. When Mr T made a complaint to CGFM, which the firm did not uphold and said it advised him not to transfer his pension, and that Mr T sent a letter "insisting" on the transfer.
The complaint was then passed to the Financial Ombudsman Service (FOS). A the time, an adjudicator said CGFM should have considered the suitability of the investment for Mr T when giving the advice about the SIPP. They said the two were "clearly connected" and believed CGFM did not gather enough information about Mr T to advise him properly.
In response, CGFM said it made sure Mr T understood the risk involved in the investment. It said it also advised him that it would be unlikely to recommend the transfer of his pension and why. CGFM also argued it did not give advice on the investment.
As a result, the case was passed on to a second ombudsman who said that in his view, CGFM could not know the best interests of Mr T without considering and understanding the investment.
The ombudsman said CGFM obtained "very little detail" about Mr T's circumstances and that he had no other investments or any experience of high risk or unregulated investments.
In addition, Mr T said he was advised by phone to sign where highlighted on paperwork and said he did not understand the process or "what everything meant." He denied saying to the adviser that he could lose 100% of his money as he could not afford to lose any of it and was not supposed to. The carbon credit investment was an unregulated speculative investment and was high risk - the ombudsman said the investor faced the "real possibility" of losing all of their money.
The ombudsman acknowledged CGFM advised against the transfer and treated Mr T as an "insistent client." In a report from February 2013, the adviser said the transfer was not recommended - primarily because of the return rate required to match the pension benefits given up if the transfer took place.
Mr T said he "scanned" the paperwork he was given and signed where directed. The ombudsman did not believe that given the complainant's background, he was proceeding based on a full knowledge of the risk of the transfer.
The ombudsman concluded that if CGFM had acted appropriately then Mr T would have kept his existing pension.
They added CGFM should have not facilitated the transfer and believed the SIPP nor the investment would have taken place was it for CGFM's actions. Therefore, any loss the client suffered has been "caused materially" by CGFM.
Consequently, CGFM should undertake a redress calculation and pay Mr T back any loss that he has incurred.
PA was unable to contact CGFM for comment.
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