Advisers wanting to avoid Fincancial Ombudsman Service complaints have been warned to check advice given to self-invested personal pension clients before 2014, after hopes of overturning the Berkeley Burke court ruling were ended.
There are concerns among advisers that the decision to drop the Berkeley Burke self-invested personal pension appeal case last week could have wider implications for
The focus is now back on advice given before the FCA published finalised guidance for Sipp operators in 2013 and a Dear CEO letter in July 2014 setting out its tougher stance against providers.
Berkeley Burke’s Sipp business, which was put into administration last month, has been fighting a Fos decision from 2014 that ordered it to compensate a client after it failed to carry out adviser-style due diligence on his investment.
The case went to the High Court in October 2018. That court sided with the Fos, meaning the ombudsman’s initial decision stood.
In February, Berkeley Burke was granted permission to appeal the ruling, with a hearing subsequently set for later this month, but last week Berkeley Burke’s administrators dropped the appeal after failing to get enough funding to cover the potential cost.
Alan Chan, director and chartered financial planner at IFS Wealth & Pensions, warned advisers to check the advice given to Sipp clients around the same time, before clients begin approaching the Fos to complain against unsuitable advice.
Mr Chan said: “It would be prudent for advisers to be proactive about this and review the advice given to any Sipp clients from that era who may be affected – not wait until it blows up into a full-scale complaint with the Fos.
“If they put their hands up to say, ‘Sorry we’ve given you the wrong advice and here’s what we’ll do to correct it,’ the client would be more willing to accept this instead of escalating a complaint to Fos.
“Not only will upheld complaints look bad on the firm, it might end up costing more the longer they leave it and could also have professional indemnity implications.”
Garry Heath, director general at adviser trade body Libertatem, was also concerned similar complaints may be made against advisers, especially where they have not advised on the unregulated investment.
Mr Heath said: “There is a danger where an adviser has organised a Sipp to be created but has not given advice on the investment, as quite often the investment comes sometime after, because the Fos has been attempting to come after the advisers in this instance.”
Due to Berkeley Burke dropping its appeal, the original Fos decision now stands, which ruled that adviser-style due diligence should be carried out on Sipp investments.
Although this case centres on Sipp providers and was before the Financial Conduct Authority made its stance known, it was subequently suggested Sipp providers were not doing enough due diligence on investments. It has further reaching consequences for the advice market too.