Financial Services Compensation Scheme  

Advisers, Sipp and DFM declared in default by FSCS

Advisers, Sipp and DFM declared in default by FSCS

The Financial Services Compensation Scheme declared three advice firms in default last month alongside a self-invested personal pension provider and troubled wealth manager which have racked up thousands of claims between them. 

In an update published today (May 18) the FSCS confirmed 12 firms had defaulted with the lifeboat body in April, including advice firms Opal Mortgage Life & Pensions Limited, City One Securities Limited and Clydegrove Financial Consultants Limited.

The advisers were declared in default alongside troubled wealth manager Greyfriars Asset Management, which has already received hundreds of claims against it relating to Sipps, pension advice and personal pension opt outs.

Greyfrairs had seen its permissions restricted by the Financial Conduct Authority before administrators were appointed to the company in October 2018, shortly after Hartley Pensions bought the wealth manager's Sipp and small self-administered scheme (Ssas) businesses for £820,000.

The FSCS said it is aware FCA authorised advisers may have recommended clients to invest with Greyfriars or to transfer their existing pensions or investments through a Sipp and if the adviser is no longer trading, claims of this nature could also find themselves on the doorstep of the FSCS. 

Collapsed provider Berkeley Burke Sipp Administration Limited also defaulted last month, with the lifeboat body having already received at least 1,474 claims against it which could lead to more than a hundred million pounds in pay outs. 

The FSCS’s investigations into the defunct provider focussed on due diligence failings before allowing customers to make unregulated investments with their pensions. 

It is not yet known how much the compensation amount will be but the administrator of Berkeley Burke’s Sipp arm, Adrian Allen, previously estimated the FSCS could end up footing a claims bill of up to £158m.

The FSCS has already paid out £54m on 1,400 claims against independent financial advisers who recommended Berkeley Burke clients to transfer their existing pensions into a Berkeley Burke Sipp.

After the transfer, customers had their pension funds placed in high-risk, non-standard investments of which some have since become illiquid, which means they can’t be sold or traded.

James Darbyshire, interim chief counsel at the FSCS, said: "Our statutory aims of protecting consumers and contributing to financial stability are particularly important during stressful times, such as in the current Covid-19 pandemic and the 2008 financial crisis.

"We apply our rules in a consistent and impartial manner, and deliver our service with empathetic efficiency."

The lifeboat body has paid out £26bn in compensation to clients of failed firms since its inception in 2001.

rachel.mortimer@ft.com 

What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.