The Financial Ombudsman Service has told two advice firms to compensate investors after they were put into inappropriate investments through a self-invested personal pension.
In one case one Portafina LLP was found to have wrongly advised a man referred to as Mr O, who was recommended to transfer his rebate-only personal pension to a Sipp.
Most of the funds were then invested in unregulated collective investment schemes (Ucis) that Portafina recommended. Mr O said he wanted "low to no" risk, but the investments were high risk.
In the second, separate complaint, Greystone Financial Services was under fire for having poorly advised Mr P to invest £25,000 each in two unregulated property funds - Phoenix Spree Deutschland and Rock Industrial UK Property.
Addressing the Portafina complaint, ombudsman Keith Taylor said: "Apart from 15 per cent of the funds which were left in cash, Mr O’s pension was invested into four Ucis.
"The funds were all speculative and involved investing in very specialised areas. Mr O was advised to invest 85 per cent of his pension funds into these unregulated investments and I don’t think this was appropriate for him.
"Mr O’s attitude to risk was recorded as being ‘moderately cautious’. I don’t think his attitude to risk or his capacity for risk was compatible with his investing such a large proportion of his pension into Ucis. I think that a reasonably competent advisor would have concluded that Ucis funds were unsuitable for Mr O."
Mr Taylor upheld the complaint and told Portafina to compensate Mr O by comparing the performance of his investment with that of the FTSE WMA Stock Market Income Total Return index and pay the difference between the fair value and the actual value of the investment.
Meanwhile ombudsman Adrian Hudson, referring to the Greystone case, found almost 80 per cent of Mr P’s pension portfolio was already invested in other Ucis funds and of overall £3m portfolio, 91 per cent was invested in property related assets.
Mr Hudson said: "For an individual like Mr P with a cautious to balanced attitude to risk at the time in my opinion to have such a high percentage of his Sipp funds invested in Ucis funds was inappropriate.
"There is no evidence that Mr P was advised of the high level of gearing and the possible consequences of this or that he was treated as an insistent customer. In my opinion had he been told of the potential risks of investing part of his Sipp in the Phoenix fund and the Rock Industrial fund he would have not have done so."
Mr Hudson also told Greystone to compare the performance of each of Mr P’s investments with that of the FTSE UK Private Investors Income Total Return index for half of the investment, and the average rate from fixed rate bonds for the other half.
The firm was told to compare the fair value with the actual value and compensate Mr P if the former was greater than the latter.
damian.fantato@ft.com
