Adviser told to pay out despite consulting regulator

Adviser told to pay out despite consulting regulator

WSW Financial Services must compensate two clients after it advised them to transfer to a self-invested personal pension (Sipp) despite contacting the regulator on how to proceed with the transactions.

In two separate Financial Ombudsman Service (Fos) decisions, which involved a husband and wife pair dubbed Mr D and Mrs D, WSW, which is now in liquidation, was told to pay redress after the clients lost their pension savings after transferring to a Sipp and investing in Harlequin, a high risk investment.

Mr D was referred to Easy Financial Planning (EFP), an appointed representative of WSW, after he expressed an interest in investing in Harlequin property using a Sipp.

Similarly Mrs D decided to transfer her pension benefits into a Sipp to invest in Harlequin after her husband had done the same thing, according to the Fos decision.

As WSW was the principal firm the complaints were brought against it rather than EFP and it was subsequently ordered to pay compensation to the clients.

Mr D had a personal pension and pension benefits from three different employers and Mrs D had pension benefits with transfer values of just under £15,000 each, although the Fos did not say how many pensions she had.

EFP’s advice to both Mr D and Mrs D was to not transfer their pension benefits, which both clients acknowledged in writing in 2011 and 2012 respectively.

But the clients decided to ignore EFP’s advice and to continue with the transfer and the subsequent investment on an insistent basis.

Ombudsman Roy Milne argued that the adviser had clearly recognised that the pension transfer was a risky transaction, revealing that the principal, WSW, had called the regulator to discuss what approach should be taken. 

He said: "The discussion with the regulator was about one case. It also involved transferring from a final salary pension scheme to a Sipp.

"I've listened to the call, which concluded by saying that the decision how to proceed was a moral one.

"I take it to mean the adviser thought transferring the pension was not suitable for the consumer involved. The question was whether EFP should arrange the transfer."

EFP also told the Fos that from 2010 it received 33 enquiries from clients who wanted to invest in Harlequin or a combination of investments.

It gave advice to 30 clients; all of whom were advised not to transfer their pensions. Of these 18 insisted on acting against the advice.

In August 2011, EFP had already consulted the then Financial Services Authority about its stance on insistent clients.

It was advised that it was only responsible for its advice and not whether the client decided to take that advice.

It was told that it could transact this type of business without liability. 

However EFP told the Fos that it has now stopped taking business on an insistent client basis.

This was after the FCA issued an alert in April 2014 about transferring to a Sipp to invest in unregulated products.