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Hotel room advice comes to haunt IFA after 11 years

Hotel room advice comes to haunt IFA after 11 years

Insight Financial Associates has been ordered to compensate a church minister whom it had advised to transfer his pension into an offshore property scheme during a hotel room meeting 11 years ago.

In a decision two years in the making, the Financial Ombudsman Service ruled in late August that Insight’s advice to Mr R to transfer his guaranteed pension into a Sipp which then invested in Cape Verde-based The Resort Group had been unsuitable.

Insight had argued it had not given advice on the underlying investment, only the Sipp transfer, but Ombudsman Lesley Stead said the advice to transfer into a Sipp had been as unsuitable as the advice to then invest in The Resort Group, and the two were interlinked in any case.

Mr R was introduced to the TRG investment by his son, who acted as an unregulated introducer for TRG and quasi adviser to his father, though he did not have any adviser qualifications.

The 58 year-old minister was then introduced to Insight with a view to signing off the pension transfer.

Hotel meeting

An Insight adviser met with Mr R, alongside a small group of other people, in a hotel room in 2009, where the pension transfer was discussed.

A suitability letter dated August 10, 2009 detailed that Mr R had received no advice from Insight and that the IFA’s role was to merely find a suitable Sipp provider to purchase the property.

It also said Mr R had completed a financial review with his adviser (his son) who had decided that a Sipp was suitable for his father’s needs and circumstances. 

Insight stated it had only been given limited information about the client’s finances and that the high risk nature of investing in a Cape Verde property was mentioned several times in the report.

For the service Insight was paid a £500 fee by the product provider and €1,999 (£1,800) by the developers.

Mr R told the Fos he “was impressed by his face to face advice” [given by Insight] and that the “adviser’s enthusiasm, the general ‘feel good’ atmosphere and the fact that others had agreed to invest” encouraged him and gave him confidence. 

Points of contention

There were several points of contention in the case, which led to the Ombudsman issuing two preliminary decisions before finally arriving at its final ruling.

One was whether or not Mr R had made up his mind about investing before he met the Insight adviser at the hotel.

Insight had referred to a reservation document for the TRG investment which was supposedly signed by the client before he met with his adviser - a fact Mr R disputed.

Insight also questioned why Mr R had not approached his Sipp provider when he turned 65 to ask about withdrawing his pension, having maintained previously that it had always been his intention to retire at that age.

Finally, it argued a later community project, which listed both Mr R and his son as directors, proved the minister knew about property development and had gone into the Cape Verde investment knowing of the risks and with his son’s support.