An ombudsman has criticised an IFA for claiming to provide advice on setting up a Sipp while ignoring the investments the client intended to put in the pension wrapper.
The ombudsman refused to accept Pacific IFA Ltd’s argument the firm didn’t have to advise its client on the suitability of the fund held within the Sipp.
A man - known as Mr B - complained to the Financial Ombudsman Service after he invested £36,000 with overseas property investment group Harlequin through a Sipp set up by Pacific IFA.
But Mr B’s investment property has not yet been built and it is likely he has lost all his original investment, according to ombudsman Benjamin Taylor.
Pacific met with Mr B in July 2009 and a financial review was completed which was signed by Mr B.
The firm said at this meeting it agreed it would only advise Mr B on the suitability of an appropriate Sipp to act as a wrapper for the fund.
But Mr Taylor said: “I don’t accept their argument that they didn’t have to advise Mr B on the suitability of the fund held within the Sipp.
“Pacific had a duty to take reasonable care to ensure the suitability of its advice for Mr B and to act in his best interests.
“Pacific knew that Mr B would invest almost all of his Sipp into the fund. But failed to consider whether the transfer of his personal pension into a Sipp for that sole purpose was suitable.
“If Pacific didn’t have sufficient information about the fund to advise on its suitability, then it had a responsibility to find out more - or not advise on the Sipp.”
Despite this Mr Taylor did not uphold the complaint against Pacific because Mr B had been recommended the investment by his brother-in-law - who worked in financial planning - and the ombudsman came to the view Mr B wouldn’t have taken Pacific’s advice over his brother-in-law’s.
Mr Taylor said: “I understand Mr B disputes the strength of the relationship he had with his brother-in-law.
“But I think this was a significant factor in his decision to invest.
“By Mr B’s own admission he invested before 2009 in a bond recommended by his brother-in-law. And invested in 2011 in a further unregulated fund, again suggested by his brother-in-law.
“While that relationship has now broken down, I think it played an important role in Mr B’s investment choice in 2009.”
