The Fos found advice firm CGFM Ltd should have taken into account how the client planned to invest before recommending a Sipp.
The client, who the Fos called Mr R, told the ombudsman he was phoned out of the blue in 2012 by an individual acting on behalf of a company called Carbon Advice Group, who told him about investing in carbon credits.
The company then introduced him to CGFM which recommended he transfer his two defined benefit schemes worth £45,000 to a Sipp to facilitate this investment.
But by September 2013 the company holding the carbon credits went into liquidation and the investment was given a nominal value of £1.
In May 2017 Mr R complained to CGFM about the advice he was given but the firm argued that Mr R had approached it with the intention of investing in carbon credits and the advice it gave was only on the Sipp transfer.
An adjudicator said the complaint should be upheld as it wouldn’t normally be regarded as suitable to recommend switching to a Sipp for a small pension fund.
They also said knowing Mr R was going to invest in carbon credits, the firm had a duty of care to assess whether the investment was suitable despite CGFM providing guidance on the suitability and risks associated with investing in carbon credits.
CGFM also argued that Mr R may have had an ulterior motive for wishing to transfer his pension, as he received a cash payment as an incentive for investing in carbon credits.
The adjudicator agreed that in its compensation, CGFM could make a deduction for the incentive payment Mr R received.
Ombudsman Doug Mansell said although it seemed CGFM had a process in place where it would accept a referral from Carbon Advice Group and source a Sipp provider but not give any advice about the investment itself, it should not have limited its obligations to Mr R in this way.
Mr Mansell said it was not possible for CGFM to give advice about the suitability of a Sipp without also considering how Mr R planned to invest and it was clear that the firm knew about the client’s intention to invest in carbon credits from the outset.
He also said CGFM hadn't obtained sufficient information about Mr R to give suitable advice to begin with.
The advice firm noted Mr R’s home was at threat of being repossessed at the time it advised him to transfer, which it said explained why he was intent on investing in carbon credits.
CGFM argued if it were to put Mr R in the position he would have been in now had he not transferred, it would have to arrange for his house to be taken off him as well.
Mr Mansell said: “I appreciate Mr R said that at the time he was contacted by Carbon Advice Group his home was in the process of being repossessed, and he found the introducer’s fee very attractive.
"But he also said that he made it clear he couldn’t afford to lose his pension. He was assured this was unlikely to happen.”
He added that CGFM’s suggestion to arrange to have his home taken from him as part of the compensation pay out wasn’t “realistic, let alone fair and reasonable” and did not agree that Mr R’s home had any bearing on the compensation he is due from CGFM.
The Fos ordered CGFM to pay compensation to put Mr R as closely as possible into the position he would be in if he had been given suitable advice.
It must also pay Mr R £300 for the trouble and upset caused.
amy.austin@ft.com
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