An advice firm has been ordered to compensate its clients after it transferred their pensions and Isas onto a platform which only offered access through an adviser.
In a Financial Ombudsman Service decision published in July two clients of Pharon Independent Financial Advisers claimed the firm had given them unsuitable advice after transferring their pension pots and Isas onto a platform they were not able to access.
Pharon reviewed the clients’ pensions and Isa accounts in late 2016/early 2017 and after this advised them to transfer their pensions to a self-invested personal pension and move to a new platform.
The Sipp transfer was to give them greater fund choice and flexibility and the move to the new platform was for ease of administration so that they could have their pensions and Isas on one platform.
But Pharon didn’t explain that the platform was adviser access only and when Mr and Mrs M discovered this in 2018 they complained to the firm and transferred the portfolios, without Pharon’s involvement, elsewhere.
Although Pharon admitted to the Fos that its advice hadn't explained the client access part, it said the key features document explained this and Mr and Mrs M never stated they would want access.
The clients said they assumed they would have this functionality as they had direct access on their previous platform.
They also said that Pharon’s description of the platform suggested it would be easier for them to manage their investments and that their understanding of the key features document was that they should take advice for investment choices.
An adjudicator at the ombudsman said it was Pharon’s responsibility to highlight the lack of access.
But the firm contested this saying as the clients didn’t transfer all of their Isa funds this suggested they wanted to retain some control of their plans and wanted Pharon to manage the others.
Ombudsman Roy Kuku said: “Pharon is correct in saying advisers are generally led by instructions from clients. It argues that this means Mr and Mrs M should have declared that they wanted to retain direct client access.
“However the point that Pharon does not appear to have addressed is that it changed their access arrangement, as part of its recommendation, without their instruction to do so – so, in Mr and Mrs M’s case, it chose not to be led by its clients’ instruction.
“That went against what they wanted and Pharon holds responsibility for that.”
He ruled that Pharon must refund Mr and Mrs M all the fees it received in relation to the transfers of their portfolios – but not its standard charge for advice of 0.5 per cent per annum.
It must also pay 8 per cent interest on the date each fee was paid until the date of settlement.
The firm must also pay £200 for the trouble and upset caused.