Elderly couple ‘advised to borrow £750k to invest’

An elderly couple advised to borrow £750,000 against their home and invest in just one fund has been let down by the industry’s failure to monitor professional standards, Martin Bamford has said.

The managing director of Surrey-based Informed Choice said he was “shocked” when a client told him her parents, who do not wish to be named, had been advised in 2007 by another adviser to borrow £250,000 against their property and another £500,000 for leverage to invest in a traded life policy fund.

The total £750,000 loan was then invested in the Corinthian Growth Fund, an unregulated traded life policy fund run by Cayman Islands-based Managing Partners.

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Mr Bamford said the Surrey-based couple, who are in their 70s, have been left with large debts after the fund was suspended in May 2011 over concerns about liquidity.

The fund was renamed the Traded Policies Fund in 2011. It is open for subscriptions but closed to redemptions.

According to documents seen by Financial Adviser, the couple’s former adviser, Richard Jones, was employed by Principia Consulting – part of the failed Berkeley Independent Advisers network, which went into default five months after it was bought by Tenet in 2006.

Mr Jones, now self-employed, moved to a new firm of directly authorised chartered financial planners, Cheshire-based LJ Financial Planning, and is still registered as active on the Financial Services Register.

A spokesman for the FCA said it could not comment on individual cases. He added: “If anyone has a concern about the conduct of an approved person, they can contact the FCA.”

A spokesman for the Financial Services Compensation Scheme confirmed Principia was declared in default in 2009. The couple may, therefore, be eligible for investment compensation up to the limit of £50,000 per person.

However, Mr Bamford said he would be pursuing complaints against The Mortgage Works, who allegedly authorised the loans in an attempt to obtain additional compensation.

Mr Jones said he would decline to comment until he had investigated the case further.

RIGHT TO REPLY: The Mortgage Works

A spokesman for The Mortgage Works said: “We would not discuss an individual customers’ circumstances without their written permission. We would be happy to speak to the customer directly if there are any specific concerns. For wider context, any customer taking out an equity release product would have had a mandatory requirement to take independent legal advice.”

RIGHT TO REPLY: Managing Partners

A Managing Partners spokesman said: “MPL cannot comment on individual cases. But we can confirm a number of options in relation to our Traded Policies Fund are under consideration. The aim is to try to ensure that no investor loses value as a result of investing in the fund. It should be noted that redemptions in the fund were sparked by comments from the FSA. Despite this the sterling growth share class of the TPF has continued to perform well, providing an annual return of 4.21 per cent up to 15 December 2013, and 32.08 per cent since launch in 2007.”