This year could be very bad indeed if you manage self-invested personal pensions, largely due to a handful of decisions by the Financial Ombudsman Service.
There was a time when I took Fos decisions as gospel. Largely they were even-handed and fair. In the past few years though my trust in this system has been eroded, culminating in the Berkeley Burke decision in October.
Since then we have had a few other decisions upheld against Sipp providers. The floodgates have been opened. Google now throws up dozens of claims management companies ready to lodge complaints against Sipp managers.
It is the Berkeley Burke decision that vexes me the most.
Back in 2011, the company invested a client’s money into plots of agricultural land in Cambodia. The client had found the investment opportunity himself online. He then found an introducer who put him in touch with Berkeley Burke.
Before accepting the unregulated execution-only investment, Berkeley Burke sent at least three letters to the client warning of the dangers.
The client had to send back a signed letter saying he acknowledged the risks. The investment bombed (of course) and so the client complained.
In 2014, the Fos ruled against Berkeley Burke for failing to carry out adequate due diligence on the £29,000 unregulated collective investment scheme. In October, the High Court ruled that the Fos decision was lawfully made. An appeal beckons.
So what exactly has Berkeley Burke done wrong here?
The Fos believes that as the trustee of the Sipp, Berkeley Burke should have checked the investment.
But that overlooks the fact that the client was the other trustee on the Sipp – where is his responsibility? And if all trustees are supposed to oversee every single investment in this way, what implications does this have for the role of trusteeship in general?
In 2011 it was perfectly acceptable to make this execution-only unregulated investment. Berkeley Burke did not cold call the client, it had no sales role, it confirmed with the client several times that this was an unadvised sale and risky.
In some of the other Fos cases against Sipp companies there has been a sales process – often a cold call.
That is a different matter. And we know there have been rogue elements in this industry. I would feel very differently about this case if Berkeley Burke had been involved in a sales process, but it was only providing a wrapper for the investment.
The whole point of Sipps was to allow these types of investment. This Sipp cost £250 and had a 1 per cent annual admin charge – that is hardly profiteering.
Regular readers of this column know that I am generally very pro-consumer, but that does not mean individuals can wash their hands of all personal responsibility.