AFH Independent Financial Services must refund more than £5,500 in fees after the Financial Ombudsman Service found its advice to switch providers was unnecessary and led to higher fees for the client.
The Fos found adviser AFH had given unsuitable advice to its client when it recommended she transfer her occupational pension and existing self-invested personal pension to another provider, which was more expensive for her.
The issue first arose when the client, who the Fos called Miss C, looked to consolidate the pension savings she held in her occupational scheme with those in her Sipp.
The advice AFH gave to Miss C at the time resulted in her transferring both the occupational pension and Sipp to a new Sipp with a different provider and AFH agreed to provide Miss C with an ongoing discretionary fund management service for the investments.
But Miss C later complained about the advice as she did not believe it was necessary for her to have moved her funds to a new provider and argued she had no need for the ongoing DFM service, on which she was paying fees.
When looking into the complaint, the Fos noted that from emails it appeared Miss C had been keen to consolidate but it was AFH which suggested they look at her existing Sipp as the firm had “recently negotiated a lower fee with the alternative Sipp provider”.
At the time of the switch, Miss C’s Sipp was valued at just under £280,000, and the value of the pension savings in her former occupational scheme was just over £30,000.
The investment options available on the occupational scheme were limited as the scheme only offered six funds, and members were only allowed to switch between those funds once per year.
However, the previous Sipp offered a wide range of investment funds and according to the Fos, Miss C was making “extensive use” of those choices.
AFH also provided Miss C with investment advice in relation to her Sipp and she was paying an ongoing fee to AFH for that service.
The suitability report that AFH completed said Miss C was “adamant” that she wanted to take a DFM service.
But AFH now says the use of the word “adamant” does not fairly reflect Miss C’s wishes at the time.
According to Miss C, AFH said she had no choice but to take the DFM service and move her pension savings to the Sipp with the new provider.
Ombudsman Paul Reilly found AFH was right to advise Miss C to transfer her occupational scheme to a Sipp as the investment choices were limited and it was only a small amount.
However, as the previous Sipp already had a wide range of investment funds and she had no need for a DFM it should not have advised her to swap providers.
He also noted that a DFM service would have been available through the previous provider – although this wouldn’t have been viable through AFH.