Ombudsman backs Intrinsic over adviser status

Ombudsman backs Intrinsic over adviser status

An Intrinsic Financial Planning adviser has been accused by a couple of not making her tied status clear and leading them into thinking she was an IFA.

The Financial Ombudsman Service has ordered Intrinsic Financial Planning to compensate a couple who complained that being encouraged to invest into two investment bonds and two Isas was unsuitable and that the investments performed poorly.

However Fos told the pair that despite their claims to the contrary there was no evidence that the adviser “did not explain” her tied status.

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Fos also backed the initial advice given by the intermediary.

The compensation was ordered due to switches that were later recommended by the adviser.

In their complaint, the couple said they were unhappy with the charges made by the adviser, both on the investments themselves and with respect to the amount of commission and remuneration received by the adviser.

They added they were unaware of the potential tax liabilities when taking significant withdrawals from the bonds and argued the adviser did not make her ‘tied’ status clear, leading them to believe she was an independent financial adviser.

Back in April, Intrinsic challenged the Fos’ decision to partially uphold the pair’s complaint, arguing it had been prepared to refund £13,717 – half the commission it received for recommending back in December 2010 that the pair invest £500,000 into a Sterling investment bond.

The investment was split between two funds – 90 per cent in multi-manager protected profits and 10 per cent in Cirilium Cautious. About £850 per month each was recommended to go into a Sterling Equity Isa.

The Fos rejected the couple’s claims they were duped about the adviser’s status and backed the original advice to invest in the multi-manager funds.

Ombudsman David Bird said: “I was not persuaded that (but for remedying certain tax liabilities) the advice, particularly with regard to funds used and fund risk, was unsuitable.

“I remain of the view that refunding some of the commission, making good the tax liabilities caused and remedying some of the switches, is a fair and reasonable outcome.”

The ombudsman added it was by no means clear that the adviser “did not explain” her tied status.

Even if the adviser had failed to declare her tied status, the ombudsman said not making clear the status does not give an automatic right to compensation or some form of award.

Mr Bird said: “It is by no means the case that the advice would have been necessarily ‘better’ if received from an IFA, or that what could have been otherwise recommended would have been better.”

The ombudsman ordered Intrinsic to refund half the commission it received and pay the tax liabilities, including the penalties and interest imposed for late payment by HM Revenue and Customs. The firm was also told to pay to the couple £500 for the inconvenience caused by the advice they were given.

Intrinsic had argued that Mr and Mrs G were fully engaged throughout in respect of fund choice and fund switches, with the adviser stating Mr and Mrs G were fully aware of the tax implications in respect of any withdrawals and this was confirmed directly by Sterling in writing following every withdrawal.