A pension transfer specialist has come under fire for failing to assess the suitability of a Harlequin Property investment pushed by another advice firm.
In 2012 the client’s IFA, who was not authorised to carry out pension transfer advice, recommended he invest in Harlequin Property.
This IFA worked for a different regulated firm from pension transfer specialist Arch and was a regulated financial adviser in his own right.
The client, referred to as Mr B, said he became aware of Arch Financial around April 2012 but did not meet or speak to any adviser from the business.
It was Mr B’s understanding that Arch was producing a full pension transfer report and he was told by his original IFA that this had to be done for ‘technical’ reasons.
The adviser who produced the pension transfer report for Arch Financial later went to work for the original IFA’s firm shortly after Mr B’s pension transfer had taken place.
Mr B said he never met or spoke to anyone at Arch Financial but Arch supplied a ‘fact find’ completed by the original IFA’s firm in May 2012.
This document related to Mr B obtaining a mortgage and made no mention of his proposed investment with his pension funds.
Arch Financial’s pension planning report dated 14 May 2012 summarised Mr B’s circumstances as: aged mid-40s, a higher rate taxpayer, in good health with two personal pension plans (PPPs).
Arch Financial recorded Mr B’s attitude to risk as “I consider it appropriate to take on a significant amount of risk in the hope of increasing my pension benefits.” Although not set out in the report, Mr B already owned four buy-to-let properties.
Three of these were in the UK and one was in Southern Europe.
Arch Financial advised Mr B to transfer his PPPs to an existing Sipp and acknowledged “the investment is likely to be directed towards a bespoke property based investment” and “you are looking to make an investment into an offshore commercial property venture”.
Arch Financial asked the original IFA to provide Mr B with a full breakdown of the investment, its risk profile, limitations, costs and charges, etc.
The report said the investment that Mr B was entering into relied on a number of covenants, including the issue of liquidity with the investment.
It explained to Mr B that that once he had made his investment he may not be able to sell it easily.
Arch recommended that as well as the property investment Mr B diversify his investment portfolio.
Mr B paid Arch Financial £575 for the transfer advice.
Three personal pensions totalling £77,040 were transferred to the Sipp.
In October 2012 £75,000 was paid from the Sipp as a 30 per cent deposit in the Harlequin Property scheme.
By July 2013, that same investment had been valued at £1 by the Sipp provider.
In defence against the complaint, Arch Financial said Mr B had an existing and established relationship with the original IFA based around the fact he had specific interest in building a property portfolio both in the UK and overseas.
Arch argued it didn’t know that Mr B was intending to invest in Harlequin Property.
In a final decision, ombudsman Benjamin Taylor ruled Arch Financial should be liable for a proportion, but not all, of the losses Mr B suffered.
Arch Financial was told to calculate fair compensation by comparing the value of Mr B’s personal pensions, if he had not transferred, with the current value of his Sipp in order to ascertain how much was owed.
Arch was told to pay a commercial value to buy Mr B’s share in the investment.
On top of this, Arch must pay Mr B £200 for the trouble and upset caused.
