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Introducer employee wins pension case against adviser

Introducer employee wins pension case against adviser

An adviser has been told to compensate a client after the Financial Ombudsman Service found that the advice it gave to put her pension funds into an unregulated investment was unsuitable, despite her working for the introducer at the time.

BlackStar Wealth management has been ordered to compensate its client after she complained that the advice she was given to transfer her pension to a self-invested personal pension and invest into two high-risk investments was unsuitable for her.

Her funds were invested into Dolphin Capital and into a discretionary managed portfolio with Beaufort Securities.

The client, who the Fos called Mrs E, held four personal pensions which had a combined value of £21,000 but she wanted to consolidate these plans to have more control and flexibility.

Mrs E worked in an administrative role at an unregulated introducer which made BlackStar known to her.

She said that she was interested in investing with Dolphin as “she had contact with it every day”.

BlackStar recommended that she should transfer her four personal pensions into a Sipp and invest 58 per cent in Dolphin and 42 per cent with Beaufort.

This was despite its report stating that investing a large portion into a single asset was risky.

The Sipp cost £500 to set up and BlackStar’s fee was £1,400.

Mrs E complained about the advice she was given in 2017 saying that although she worked for the unregulated introducer she never had any investment experience.

The Sipp had resulted in higher charges and was deemed unsuitable for Mrs E as an earlier report noted that she had no capacity for loss and was a “novice investor”. 

But BlackStar argued that Mrs E had already decided that she wanted to invest in Dolphin and also wanted more control of her pension.

The firm said Mrs E had confirmed that she worked with the Dolphin product on a daily basis and was fully aware of it.

But the adjudicator at the Fos said BlackStar should have taken into account the suitability of the intended investments when it recommended the transfer.

He said the investment was “clearly unsuitable” as it was unregulated and illiquid. The Dolphin loan notes relied upon tax breaks in Germany which could be withdrawn, he pointed out.

He added that investing 58 per cent of the pension fund into this was an over-concentration in one asset.

However, the adjudicator said the Beaufort Securities investment has since failed and the Financial Services Compensation Scheme was accepting claims, therefore this element of the investment should be excluded from the compensation.

Ombudsman Keith Taylor decided to uphold Mrs E’s complaint on the basis that she was not a qualified investor and was entitled to rely on the advice that she was given.

He ordered BlackStar to put Mrs E as closely as possible into the position she would be in now if she had been given suitable advice and to pay £300 for the distress and inconvenience caused and the impact on her retirement planning.