Carey has lessons for us all

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The Carey Pensions case has important lessons for all of us in financial services. 

The High Court found against the self-invested personal pension client bringing the claim, judging Carey Pensions should not compensate him for a high-risk, execution-only store pod investment that went wrong. It essentially adjudicated an execution-only service does not need to bear responsibility for the high-risk investments it offers within its Sipp range.

The Financial Conduct Authority, however, maintains that any high-risk investment available via a Sipp provider should be assessed properly by the provider under the regulator's guidance on non-standard investments.

It should not have come as a surprise to any in the industry that a non-standard investment might go wrong

To compound matters, the Financial Ombudsman Service last week ordered Carey Pensions to compensate a different client, finding Carey had not carried out adequate due diligence before accepting a Sipp application from an unregulated introducer.

It should not have come as a surprise to any in the industry that a non-standard investment might go wrong, nor that the provider allowing such NSIs might find itself questioned about permitting such investments. 

Indeed, many Sipp providers saw the writing on the wall years ago and stopped permitting NSIs.

When you speak with Sipp experts who tell of being approached by floggers of investments such as Bulgarian buy-to-let or Ukrainian cemetery plots, it is difficult to see why any provider would open the doors to NSIs, when assessing such 'investments' properly is practically impossible.

When you also factor in the regulatory scrutiny over NSIs, together with increasing enforcement action and capital adequacy constraints, it is hard to make the case for allowing anyone to invest in such schemes within their Sipps. 

Arguments have been made by John Moret and the like to only allow high-net-worth individuals with high-risk tolerances to access such investments. Such a move appears to be sensible – you're not limiting choice, you're limiting the risk of financial penury for lower-net-worth clients. 

The Carey case should be a wake-up call to all Sipp providers and investors. 

Whether the industry will learn these lessons or not is another question altogether.