The Financial Ombudsman Service (FOS) has ordered Pacific IFA to compensate a client following an unsuitable pensions transfer and advice to invest in a Harlequin overseas property investment.
Mr L, as referred to by the ombudsman, and his wife were introduced to Harlequin by an adviser from a third-party business that was an appointed representative of a firm regulated to give advice.
Following several meetings and a sales pitch from Harlequin, Mr L decided to invest in four properties in 2009 - none of which were ever built. At around this point the couple was introduced to Pacific IFA, as the adviser firm they had been speaking with did not have permission to advise on pensions. At the time, in a meeting that was recorded, Mr L "had about as much [investment] understanding as the next person", according to a fact-find, was 58 years' old and planned to retire at 65. He had an income of around £33,400 each year and had £10,000 in savings.
In August 2009 a self-invested personal pension (SIPP) was set up to make the purchases, totalling approximately £103,700. The remaining SIPP money was left in a deposit account until January 2010. According to the ombudsman, Pacific advised Mr L to invest a further £32,000 into a fifth property, which he was told was purchased outside of the SIPP.
As the property contracts were signed, Mr L was sent a report from Pacific that said it was not associated with Harlequin in any way and therefore did "not offer any advice in relation to the suitability of the investment property or whether suitable in line with your needs, aspirations or attitude to risk".
In 2015, after learning the properties had not been completed, Mr L complained to Pacific, but the firm did not uphold the complaint, arguing it only advised on the SIPP - not the Harlequin investments. It argued it had told Mr L of the risks involved, which he apparently ignored. It also argued Mr L stopped receiving payments from Harlequin in late 2012 and queried whether he knew there was an issue with Harlequin at that point.
According to the FOS, a customer usually needs to complain within six years of the event in question. Mr L's investment was made in 2009, but he complained about it in 2015. However, a FOS investigator at the time was satisfied the complaint hadn't been made outside of these limits. She said she could not see anything that persuaded her Mr L knew, or ought to have known, of cause to complain more than three years before he complained.
Pacific did not provide any further comments and so the decision was passed back to the FOS. An ombudsman agreed with the initial investigator, arguing that Mr L would not have been expected to know that there were issues with Harlequin, despite the FCA and the Serious Fraud Office opening an investigation in 2013.
She asked Pacific to pay back any losses Mr L incurred, including five years of SIPP fees. She argued that, had the advice been suitable, she did not think there would be a SIPP, and so Pacific should put its client back into the position he would be in had the advice not occurred.
At the time of writing, there are 24 further published FOS decisions upheld against Pacific IFA, the majority of which relate to SIPP advice. Harlequin Property is a UK-based overseas property sales agent that is not regulated by the Financial Conduct Authority (FCA). It took around £400m of investors' money to develop villas in the Caribbean. It has had "severe" problems in the past and many properties investors paid into were never completed.
Professional Adviser has contacted Pacific for a comment.
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