Adviser to compensate client over SIPP transfer advice to unregulated schemes

Mr P, as referred to by the FOS, complained about advice given by an appointed representative (AR) of On-Line to switch his personal pensions to a SIPP. He said he was given this advice by Bragagnini Associates Financial Solutions (BAFS). 

Mr P was advised to invest in unregulated schemes, which included agricultural investment Green Oil Plantations, overseas holiday resort The Resort Group and Store Pods, UK-based storage pods.

Because the investments were unregulated collective investment schemes (UCIS), Mr P argued they were unsuitable as he was not a sophisticated or high net worth investor. Mr P was an accountant and earning around £38,000 a year. He did not have any experience of speculative, unregulated investments.

On-Line did not uphold the complaint and said that, when Mr P approached BAFS, he had already been persuaded to switch his pension to invest in the UCIS. Therefore, as BAFS proceeded on an advised basis, the transaction should be viewed as ‘execution only'.

An investigator at the time felt the complaint should be upheld as they believed On-Line had a duty to make a suitable recommendation to Mr P that included the intended investments he was to make - even if another party had given the advice. She also felt the investments were of a higher level of risk than was suitable for the client and resulted in a lack of diversification.

On-Line disagreed and so the complaint went one rung higher in the ombudsman claim process. On-Line argued that Mr P was an accountant and would expect him to have a good understanding of investing. It also said that a risk profiling exercise had assessed the client as someone willing to accept a high degree of risk.

Compensate for loss caused

After reviewing the complaint, the ombudsman argued On-Line could not give suitable advice on the combined SIPP and investments without taking into account the investment itself. The ombudsman believed Mr P was not in a position to lose money and, because the schemes were unregulated, he did not benefit from the protection that could have been afforded by the Financial Services Compensation Scheme.

The FOS upheld the complaint and asked On-Line to pay compensation towards Mr P, including paying an amount into the SIPP, paying any future fees owed to the SIPP for the next five years and pay £300 for the trouble caused.

There are currently 37 upheld FOS decisions against On-Line published on its website. 

Professional Adviser contacted both On-Line and BAFS for a comment.

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• Topics
• Pensions
• Green Oil Plantations Limited
• Resort Group
• Bragagnini Associates Financial Solutions Limited
• SIPP