The Financial Ombudsman Service has rejected an adviser’s argument that its agreement to process a land fund investment was an execution-only transaction.
Mentor Financial Limited said it gave no advice of any sort, made no recommendations and it was an administrative task only to help the client make the investment he wanted.
The client, referred to as Mr T, invested £36,000 into the Stirling Mortimer fund in April 2010 after he transferred to Mentor from a firm which had ceased trading.
Mentor provided a copy of the suitability letter from Business A that referred the advice to invest in Stirling Mortimer and argued it agreed to help on the understanding it was an execution-only transaction.
But in a final decision ombudsman Adrian Hudson said Mentor should have assessed the suitability of the proposed investments for Mr T particularly after they were appointed as his advisers.
Mr Hudson said: “It was not acceptable to rely on the advice of an earlier business. Therefore in my opinion Mentor is responsible for the advice.
“The fund selected in the Sipp was in in my opinion unsuitable for Mr T and I consider should not have been recommended to Mr T.”
In 2009 Mr T was told to transfer his existing pension plans into his Sipp by an advice business that ceased to be regulated on 16 December 2009.
When his advisers shut up shop, Mr T received notification Mentor would be his new financial adviser and the servicing of his Sipp was transferred to the company in March 2010.
Mr T signed the instruction forms for the investment into Stirling Mortimer No 9 UK Land fund in March 2010 Mentor was recorded as his financial adviser.
Mentor provided a copy of the suitability letter from business A that referred the advice to invest in Stirling MortimerIn 2015 Mr T complained to the Financial Services Compensation Scheme (FSCS) about the advice he received from the now defunct business to invest in the Stirling Mortimer No 9 UK Land fund.
But the FSCS concluded the investment took place after the business ceased advising Mr T so at the time of the investment it was Mentor and not the defunct firm acting as Mr T’s adviser.
As a result Mr T then complained to Mentor, which argued it was not responsible for the advice as it was acting a locum who just facilitated the previous pipeline business only.
A Fos adjudicator then considered the complaint.
The adjudicator replied to Mentor that the instructions on the Sipp application did not have investment instructions plus the letters sent to Mr T referred to Mentor as being advisers.
To compensate Mr T fairly, Mentor was told to compare the performance of Mr T’s investment with that of the benchmark and pay the difference between the fair value and the actual value of the investment.
Mentor should also pay interest plus £200 for loss to his pension fund.
emma.hughes@ft.com
