Adviser to pay out after client's Sipp filled with Ucis

Adviser to pay out after client's Sipp filled with Ucis

An advice firm has been ordered to pay out after it told a client to invest in an unregulated collective investment scheme, despite the client's previous exposure to such an investment.

The client complained to the Financial Ombudsman Service after he was advised by Professional Financial Services to invest in Waste to Energy Partnership via his self-invested personal pension (Sipp).

It was the second such investment made by the Sipp and meant other than cash, his entire Sipp was now made up of Ucis investments.

The client argued the investment was unsuitable and had left him out of pocket.

Ombudsman Nina Walter ordered the firm to put the client in the position he would be in had he not been advised on the Ucis.

What happened

The client, who the Fos called Mr C, set up a Sipp in 2007 into which he transferred £82,786 from two personal pensions in 2010.

He took a tax-free cash payment of £20,649 in May 2010 and then in August he invested £50,000 into the Waste to Energy Partnership, which later tanked.

Mr C complained to Professional Financial Services in December 2017, arguing the investment had been too high risk and not suitable for him. 

But the firm said he had referred his complaint outside the regulator’s time limits.

However, the Fos decided the complaint had been made within time and began to investigate.

Professional Financial Services is a dissolved partnership therefore the Fos said the former partners are “jointly and severally liable”.

But one of the partners, who was dealing with the complaint, argued he had not given any initial advice to Mr C.

The partner said he had met with Mr C in 2013 to discuss his pension and other assets after the original adviser (another former partner of the firm) could no longer give advice.

The partner also argued that Mr C had confirmed he understood the illiquid nature and risks of the investment.

Apparently Mr C told him he saw renewable energy as an opportunity for growth and returns and the PFS partner who had originally advised him was a close friend, so Mr C did not think he would have been advised to go into a “duff investment”.

Ombudsman’s findings

Walter pointed out the forms from the Waste to Energy Partnership stated Professional Financial Services as the financial adviser and therefore she was satisfied the firm had advised Mr C to invest in the Ucis.

According to the regulator, Ucis investments are not suitable for most investors and should only form a very small part of a saver’s portfolio. 

However, Mr C had already invested £100,000 three years earlier into another Ucis, which meant other than cash, his entire Sipp only included Ucis investments.

Based on Mr C’s circumstances at the time, the Fos said it was clear he did not have the "investment experience, attitude to risk or capacity for loss" to take on such a non-standard and specialist investment, particularly as he already held another Ucis investment.