Financial Conduct Authority  

FCA fines IFA £107k for unsuitable pension transfer advice

FCA fines IFA £107k for unsuitable pension transfer advice

The Financial Conduct Authority has fined an advice firm after finding it transferred millions of pounds worth of clients' pensions into high-risk and illiquid investments without giving proper advice. 

The regulator slapped Warrington-based LJ Financial Planning with a £107,200 fine and warned its failings were "especially serious". 

According to the FCA the advice firm recommended 114 clients transfer their pensions into self-invested personal pensions between March 2010 and December 2012, but without providing any advice on the underlying investments held in the Sipps.

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The total amount invested by clients in this way topped £6m, but the investments were often high-risk, esoteric and illiquid. 

The City watchdog said LJ Financial Planning was aware of the potentially high-risk nature of the investments and in one case a senior employee made clear in an email to its compliance partners that the firm did not "want to know" what they were. 

LJ Financial Planning has so far paid more than £2.6m in redress to 41 clients and is expected to undertake a customer contact exercise to compensate any outstanding eligible investors. 

The FCA said the advice firm had "failed to take reasonable care to ensure the suitability of its advice for these customers", who it said "ought to have been able to rely upon its judgment in relation to the suitability of this transfer". 

Mark Steward, executive director of enforcement and market oversight, warned investors should be able to trust their advisers with the pension contributions built up "over a lifetime of hard work".

Mr Steward said: "These failings were especially serious because LJFP facilitated the transfer of these investors’ pensions into high-risk investments without assessing whether the investments were suitable for investors.

"In many instances, these investments are now worthless and many investors are approaching or already in retirement and so especially vulnerable to the risk of significant losses.

"Redress is important but these investors should never have been placed in this position in the first place."

He added that investors should be able to rely on their financial advisers to manage conflicts fairly and "to disclose them so consumers are able to make better informed decisions".

The FCA also warned that between January 2013 and November 2017 the firm failed to manage potential conflicts of interests between itself and its customers.

According to the watchdog LJ Financial Planning had recommended Amber Financial Investments Limited as a wrap platform for its customers.

As a result customers could make investments through discretionary fund manager Tatton Investment Management without disclosing to customers that it had shareholdings in these companies.

Last week FTAdviser reported that LJ Financial Planning had to compensate one of its clients after it failed to take into account a high-risk, unregulated investment when giving advice on a Sipp switch.

The Financial Ombudsman Service found although the adviser had carried out a fact-find, it did not collect any information as to the nature of the investment the client was intending to make.