Adviser to pay out after pension switches led to higher costs

Adviser to pay out after pension switches led to higher costs

An advice company has been ordered by to pay compensation to its client after its recommendation to switch pension plans led to higher costs and commission payments.

Positive Solutions has been ordered to compensate its client after he complained the advice he was given to transfer his pension to a different scheme on two separate occasions were unnecessary and resulted in higher costs.

In a Financial Ombudsman Service decision from September, a client, who the Fos called Mr W, complained about a number of recommendations made to him by an adviser at Regent Wealth Management, a registered individual and trading style of Positive Solutions.

When considering the complaint, ombudsman John Pattinson said that he was satisfied that Regent, acting as an agent for Positive Solutions, advised on the switch from a Skandia pension to a Hartford pension and the switch from Hartford to an IPM Sipp.

But the ombudsman said that investments from the Sipp to stockbrokers Lewis Charles Securities and Saxo was carried out by other unregulated businesses rather than Regent so was not considering these as part of the complaint.

Mr Pattinson came to the conclusion that the advice was unsuitable as there was insufficient justification for either the switch to the Hartford pension and the associated Hartford investment or the switch to the IPM pension, and the associated investment in Metlife. 

The ombudsman argued the Hartford investment portfolio, which was made up of 74 per cent in equities, 20 per cent in fixed interest and 6 per cent in property, was not dissimilar to his Skandia pension which gave him exposure to the same asset classes but with a larger exposure to property.

He also said that although the Hartford product did provide guarantees but these were not sufficient enough to address Mr W’s concern and his money was still exposed to market volatility.

The switch to Hartford also involved a significant increase in ongoing costs and commission charges.

The switch from Hartford to IPM Sipp also incurred charges and an increase in ongoing costs.

Mr Pattinson said: “In both instances I thought Regent put its interests ahead of Mr W’s by recommending an option which would generate a large amount of commission and incurred him unnecessary initial and ongoing costs by doing so. 

“And the recommendations made do not appear to have addressed Mr W’s core objective – which was to reduce his vulnerability to volatility in the capital value of his pension investments.”

He added: “Had a full and balanced explanation of the 'pros and cons' been given to Mr W, alongside a full comparison between the Skandia and Hartford pensions, I think it unlikely Mr W would have accepted the advice to switch. 

“I think the extent of the cost he was to incur would have been clear to him, and that it would also have been clear to him that the Hartford investment did not guarantee the fund value, as Regent had suggested.”