The Financial Conduct Authority has banned and fined a financial adviser £116,000 for providing "reckless and unsuitable pension switching advice" which involved putting £13.5m of retirement savings at risk.
Omar Hussein, former director and senior financial adviser at pension switching firm Consumer Wealth, was found to have advised clients to switch their existing pensions to Sipps and into Greyfriars Asset Management's Portfolio 6, which later failed.
The regulator said that between 2015 and 2017 Hussein and his firm advised 620 customers to switch their pension, putting at risk an estimated £13.5m of retirement savings.
Hussein's firm has since gone out of business, meaning claims have gone to the Financial Services Compensation Scheme, which to date has paid compensation to 437 clients.
P6 was a high-risk investment made up of unregulated mini-bonds relating to overseas investments in car parks, renewable energy and holiday resorts.
These investments were illiquid and highly likely to be unsuitable for the low net worth, financially inexperienced investors who were the firm’s target market, the FCA said.
Several of the underlying mini bond investments in P6 subsequently failed and P6 was closed to new investment in 2016. Greyfriars went into in administration in 2018.
The FCA's executive director for enforcement and market oversight, Mark Steward, said: "Consumers work hard over many years to save for their retirement and unsuitable pensions advice can significantly impact their quality of life in retirement – or their ability to retire at all.
"Mr Hussein acted recklessly and abused the trust of his clients by taking unjustifiable risks with their retirement savings. He has proven himself unfit to work in the financial services industry."
The FCA said Hussein had disregarded clear statements and risk warnings about P6 contained in Greyfriars' promotional material.
He had also described the investors as ‘experienced’ and charged fees for an on-going advice service which the firm did not provide.
The FCA said Hussein's failings were particularly serious because he had abused a position of trust when advising his clients, many of whom were financially inexperienced, vulnerable and had no or limited capacity for loss.
"They were also serious because, by his own admission, he was aware of the FCA’s pension alerts, published prior to [Consumer Wealth] being established," it added.
These alerts reminded financial advisers that when advising customers to switch to a Sipp, they had to assess the suitability of the underlying investments to be held in the wrapper.
It also warned that non-mainstream investments were unlikely to be suitable options for the vast majority of retail customers.
Consumer Wealth has ceased trading and is now in liquidation.
Hussein agreed to settle at an early stage of the investigation and therefore qualified for a 30 per cent discount. Without the discount, the fine would have been £165,797.38.