Lighthouse-owned The Falcon Group Limited must compensate a client it advised transfer their pension because “fortune will favour the fleet of foot”.
Falcon wrote to a client, referred to as Mr M, on 18 December 2008 recommending he transfer the value of his protected rights into a new self-invested personal pension.
The intermediary said: “In uncertain times, the more minds the better and having provided active advice on your self-invested plan we discussed whether, following recent changes in legislation, there is merit in consolidating the value of your protected rights policy and your existing Sipp into one over arching arrangement.
“When glimmers of recovery are sighted, fortune will favour the fleet of foot and if you are to be in a position to take advantage of opportunities it will be have capital earmarked for possible investment on the same radar screen.”
Falcon also recommended that Mr M switch his protected rights into cash, so that: “The proceeds from this fund will add to existing cash on deposit to create a ‘war chest’ of approximately £46,000 held available to seize any opportunities considered to have merit as the market position develops.”
Falcon arranged for Mr M’s pension to be transferred into another Sipp in April 2009, after the business had been acquired by Lighthouse in 2008.
A Financial Ombudsman Service adjudicator who investigated Mr M's complaint found the initial Sipp could not accept direct investments in unlisted companies while the Sipp set up in April 2009 could.
Mr M signed to invest £30,000 in a business called Splash in June 2009 but the company later went into liquidation without any return to Mr M.
Lighthouse rejected Mr M’s complaint arguing it had told Falcon there needed to be clear separation between its authorised activities and the promotion of unlisted investments such as Splash.
Lighthouse argued there was no evidence Falcon advised Mr M to invest in Splash.
The adjudicator referred to an alert issued by the Financial Services Authority (‘FSA’) in January 2013, which said: “It has been brought to the FSA’s attention that some financial advisers are giving advice to customers on pension transfers or pension switches without assessing the advantages and disadvantages of investments proposed to be held within the new pension.
“In particular, we have seen financial advisers moving customers’ retirement savings to self-invested personal pensions (Sipps) that invest wholly or primarily in high risk, often highly illiquid unregulated investments (some which may be in Unregulated Collective Investment Schemes).
“Examples of these unregulated investments are diamonds, overseas property developments, store pods, forestry and film schemes, among other non-mainstream propositions.”
“The FSA’s view is that the provision of suitable advice generally requires consideration of the other investments held by the customer or, when advice is given on a product which is a vehicle for investment in other products (such as Sipps and other wrappers) consideration of the suitability of the overall proposition ….