SIPP  

Fos dismisses Openwork’s insistent client argument

Fos dismisses Openwork’s insistent client argument

Openwork has been told to compensate an appointed representative’s client despite the intermediary arguing he was an insistent client.

In late 2009, Mr M met with an adviser who worked for one of Openwork’s appointed representatives. 

Following discussions with that adviser, Mr M transferred his existing pension to a Sipp. 

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The Sipp received a transfer amount of just over £111,000 in February 2010.

In March 2010, £30,025 was transferred from Mr M’s Sipp to Harlequin and in November 2010, £50,000 was transferred from the Sipp to a Sterling Investment Account, to be invested in Gartmore’s Cautious Managed fund.  

By the end of November 2010, the cash balance of Mr M’s Sipp was just under £22,000. 

Harlequin later experienced difficulties, and Mr M believes he has lost all of the money he invested. 

When he complained to Openwork, the intermediary argued it did not advise Mr M to transfer his pension to a Sipp and when the adviser gave the transfer advice he did not consider whether Harlequin was a suitable investment.

Following an alert the regulator issued in 2013, Openwork accepted the adviser should not have advised Mr T to transfer to a Sipp without also considering the suitability of the underlying investment. 

On that basis, Openwork said Mr M’s complaint was “technically upheld” but the intermediary did not offer to pay any compensation.

Openwork argued it was satisfied Mr M would still have gone ahead with the Harlequin investment as it understood he was acting on the advice of his daughter who worked in financial compliance at the time and knew a Harlequin agent. 

However the Financial Ombudsman Service ruled Mr M would not have gone ahead with the investment had Openwork acted properly and recommended the intermediary compensate him for his losses. 

In a final decision, ombudsman Laura Colman said while she was satisfied that Openwork’s contract with its AR did not allow the adviser to give advice on Harlequin that did not mean he should not have given any advice on this pension transfer at all. 

She said the adviser knew the purpose of the pension transfer was to allow Mr M to invest in Harlequin, and so the intermediary could not have given suitable advice about the pension transfer without considering the suitability of Harlequin. 

Ms Colman said: “Although Openwork has suggested Mr M might have gone ahead on an ‘insistent client’ basis that is not what actually happened. 

“Mr M was not told that Harlequin was unsuitable for him, and he was not given the opportunity to decide whether to go ahead on an ‘insistent client’ basis.  

“In my experience, consumers who seek out financial advice are unlikely to act against that advice. In the absence of strong evidence, I will not simply assume that a consumer would have insisted on taking a course of action that an adviser had recommended he did not take.