Fos’s hands tied over pre-RDR advice process

Ray Shepherd

I met a new client – we will call him Mr Brown – who was very wary of IFAs. He received the following advice from a previous IFA – we will call him Mr Rip-Off. Mr Brown is a non-sophisticated investor.

In 2010, Mr Brown is cold-called and then meets Mr Rip-Off, who recommends that Mr Brown transfers his three existing pensions to Skandia, and a Suitability Letter is sent to Mr Brown. Mr Rip-Off then ignores his own recommendation and instead transfers Mr Brown’s pensions to a Sipp with Berkeley Burke investing into Sustainable Agro Energy, Storefirst Store Pods and Mosaic Cascade Portfolio. Mr Brown does not receive any written recommendation and is asked to sign application forms believing that Mr Rip-Off is transferring his pension to Skandia. Mr Rip-Off witnesses all the signatures and submits the documentation to Berkeley Burke and sets up a separate limited company, not registered as an IFA, to receive all the commissions from the three underlying investments.

In 2014, Mr Brown discovers that his Sustainable Agro Energy investment has gone into receivership, and the other two investments are tied up for the long term. Mr Rip-Off is in the clear so far as responsibility for this “advice” is concerned because he did not put anything in writing. His employer at the time of the advice states that Mr Rip-Off was working beyond his authorisation and so they are not responsible for his advice – this despite the fact that the co-director in the company set up to receive the commission is none other than the director of the original company which employed Mr Rip-Off, and is the individual who originally cold-called Mr Brown.

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Mr Brown is £60,000 out-of-pocket with no redress, according to Fos, as there is no advice process to follow. Hurray for compliant advice.

Ray Shepherd

Chartered Financial Planner,

WFI Financial LLP,