Robert Gerrard & Westbrook Ltd has been told to compensate a client it advised to transfer out of a personal pension into a self-invested personal pension.
Despite Robert Gerrard & Westbrook Ltd arguing the Sipp cost less than the client’s personal pension and was appropriately invested given her attitude to risk, the Financial Ombudsman Service questioned why half of her savings had been ploughed into a Principle Asset Allocation fund, which the advice firm had a hand in managing.
RGW argued their April 2015 suitability report clearly showed the costs for the Sipp were less than for the client’s old plan, plus she wanted to take less risk and when comparing the new funds with those in her old plan, the advice achieved this.
The client, referred to as Mrs H, wished to invest in funds that gave some capital protection, RGW argued, which was why structured products were recommended.
While two of the structured products don’t guarantee the capital will be returned, RGW said they are still deemed to be medium risk.
But the ombudsman ruled Mrs H wasn’t given an accurate comparison of charges between her existing plan and the proposed Sipp.
If the intention was to use structured products as a way of providing some capital protection, RGW said it was only partially successful as only one fund offered this.
The ombudsman also queried why so much of her savings was ploughed into the Principle Asset Allocation Fund.
In a final decision, Doug Mansell, ombudsman, said: “I appreciate investing in a new fund with no track record would not necessarily be unsuitable. But I think a greater degree of caution should have been exercised rather than expose such a percentage of her pension portfolio to this one fund.
“In any event, I don’t think the fund, in light of its intended asset mix, was suitable for Mrs H. I think it posed more risk than she wished to take.
The ombudsman rules the adviser should have explored reducing the charges on her existing plan and re-jigging the selection within the personal pension.
The adviser must pay £300 for the distress and concern caused by their action.
RGW was told to compare the current value of Mrs H’s Sipp with the value of her pension if she’d remained with her existing provider, taking account of any additional contributions or withdrawals, and pay this sum.