Solicitors offering to help steelworkers bring claims against failed adviser Active Wealth at the Financial Services Compensation Scheme (FSCS) have been found to be asking for up to a third of the redress payout in fees.
TLW Solicitors have agreed to help clients bring claims with the lifeboat scheme on a no-win no-fees basis.
But for every successful claim they charge a percentage of the total value of the payout plus VAT.
According to a financial adviser who mystery shopped TLW about the cost of making a claim in this way related to British Steel pensions, the total charge could amount to as much as 30 per cent of the redress payment.
When this was put to TLW, the law firm said it judges each case on its individual merits, and declined to give details of its charges.
The FSCS has an upper limit for investment compensation of £50,000, meaning a claim could garner fees of up to £15,000.
Compensation paid via the scheme is paid for by the financial services industry. The FSCS is free of charge for investors to use directly.
Adviser Al Rush, principal at Rutland-based Echelon Wealthcare, said he was “speechless” and concerned about people trying to “get another chance of the steelworkers’ money”.
He said: “If this was a film, it’d be a comedy. Either that, or a tragedy. You couldn’t make this up. I am almost beyond words.”
Active Wealth entered into voluntary liquidation in February, months after the firm was told to cease any pension transfer activity by the Financial Conduct Authority (FCA).
It was one of ten firms that stopped giving transfer advice after they were identified by the regulator as key players advising members of the British Steel Pension Scheme to transfer out their defined benefit (DB) pensions.
It emerged in February the firm had advised as many as 300 BSPS clients, of which 64 proceeded to transfer out of the BSPS scheme into alternative pension arrangements without taking further advice.
Some of these clients saw their pension pots invested in self-invested personal pensions (Sipp) provided by Momentum Pensions and managed by Gallium Fund Solutions, a Kent-based discretionary investment manager.
A separate group action is also being brought by solicitor firm Clarke Willmott, which charges a flat fee of £500 per FSCS claim.
Partner at the firm, Philippa Hann, is also inviting claims against other parties involved in the Active Wealth debacle, for which she will charge a fee based on an hourly rate and on a no win no fee basis.
Consumers who have lost money as a result of bad advice can bring their own claims to the FSCS free of charge but they may struggle to navigate certain technicalities around their claimant’s rights.
For instance, when the lifeboat fund is trying to recover additional losses, it will ask the claimant to assign it their rights, which will then be reassigned to them upon request when the FSCS decides to stop pursuing further recoveries.
This affects claimants who have suffered losses bigger than the current £50,000 limit the FSCS can pay out in compensation.
TLW’s services were advertised to steelworkers by Fidelis Wealth Management in a letter dated 28 March and seen by FTAdviser.
In the letter, Andrew Deeney “strongly advises” people to seek help from TLW, which “specialises in bringing claims against financial advisors who have given unsuitable advice to clients”.
“If they feel you were badly advised and have lost money as a result, they will be prepared to act for you in seeking compensation on a ‘No Win No-Fee’ basis,” he wrote.
“Even if you are unsure as to whether you have lost any money as a result of the advice it is probably worthwhile speaking to TLW Solicitors in order to check,” the letter continued.
TLW confirmed they are offering the service to steelworkers but would not disclose the fees they charge.
Alistair McDonald, head of marketing and business development at TLW, told FTAdviser: “As yet we have not been instructed by any former clients of Active Wealth. If we are, then we would need to look at what, if any, potential claim or claims they may have and judge each one on an individual basis.”
Mr Deeney did not respond to repeated requests for comment.
FTAdviser reported in November that Active Wealth was working alongside unregulated introducer firm Celtic Wealth Management & Financial Planning, which referred the clients the adviser.
BSPS members had until 28 March to transfer their pensions out, else they would be transferred to either the Pension Protection Fund or the new scheme, BSPS 2.
Figures obtained by FTAdviser in February showed more than £1bn had been transferred out since March 2017, by about 2,600 members.
carmen.reichman@ft.com
