An advice network has been made to pay out after a client was advised to carry out a pension switch in order to invest in three high risk unregulated schemes.
The client was advised by an appointed representative of network The On-Line Partnership to switch his personal pensions, which were worth around £78,000, to a self-invested personal pension (Sipp) to subsequently invest in Green Oil Plantations Limited, The Resort Group and Store First, all of which were unregulated investment schemes.
Green Oil Plantations was a UK based investment set up to fund Australian Mellettia tree plantations, with the idea of harvesting oil from the trees to produce bio-fuel and other agricultural products for profit. The scheme went into administration in 2013 leaving investors out of pocket.
Meanwhile, Store First bought and developed purpose-built self-storage buildings on 15 sites around the UK. Store First Limited and three related companies were wound up in the High Court in April 2019.
The Resort Group owns four luxury resorts in Cape Verde, one of which - White Sands - remains under construction. Investors were sold bricks-and-mortar as well as share-based investments as part of the scheme in return for rental and interest payments.
However, many investors have faced delays on their payments and the Financial Services Compensation Scheme is already paying out on behalf of the failed advisers that sold them.
The client, who the Fos called Mr P, argued he was not informed of the risky nature of these schemes and that he was given unsuitable advice.
As a result the Fos ordered The On-Line Partnership to put him back into the position he would have been in had he not received the poor advice.
The issue first started when Mr P approached On-Line’s AR firm, Bragagnini Associates Financial Solutions Limited (BAFSL), for advice.
On-Line said when Mr P approached BAFSL he had already been persuaded to switch his pension to invest in Ucis by another party - Bragagnini Associates Mortgage Solutions Limited (BAMSL).
So it argued that although its AR firm made a personal recommendation to Mr P, the transaction should be viewed as “execution only” and “non-advised”.
It also said even if BAFSL had advised Mr P not to proceed, he would have gone ahead anyway.
But the Fos’ adjudicator found On-Line had a duty to make a suitable recommendation to Mr P and that included the intended investments he was to make.
So even if another party had given advice on the investments, On-Line should have recognised they were unsuitable.
She also refuted that the advice given could be deemed as execution-only or non-advised.
The Fos found although On-Line said advice was not provided on the investments and only the Sipp, its AR did know the intention was to invest into unregulated investments as it was mentioned in its suitability report.
Ombudsman David Bird said the firm could not give suitable advice without taking account of the investments which the Sipp was put into place to facilitate.