Fos accuses adviser of trying to justify advice with hindsight

In 2010 Singer Financial Trust told a self-employed client, referred to as Mr S, to transfer the benefits in his two stakeholder pension plans, worth approximately £4,500 and £39,000, to an income drawdown plan. 

While Singer was unable to provide any fact-finds from 2010, when Mr S was 66-years-old and single, it was able to offer the Financial Ombudsman Service a recommendation and suitability letter from the time. 

Mr S’s attitude to risk was recorded as medium/high and it was stated he wished to take retirement benefits at the age of 75.

Singer recommended an income drawdown plan so Mr S could draw taxfree cash and an income. 

The plan offered a wide range of funds and the proposed drawdown fund was less than other provider’s limits. 

In my view, by way of these requests, Singer is attempting to show that its advice was suitable with the benefit of hindsight..Terry Connor

Singer recommended four managed funds.

The firm warned: “Past performance is not a guarantee to future performance and whilst the past performance of the recommended pension fund has been good your pension fund may not be as large as expected at retirement and you are unable to access anymore tax-free cash in the future.” 

Singer was criticised by the ombudsman for not fully explaining to Mr S the risks of income drawdown compared to an annuity and the fact the report they produced made little reference to the risks involved.  

The ombudsman also claimed the report did not give proper reasons why income drawdown was suitable.  

The fact that the income drawdown fund was too small for only two providers to consider was wrongly presented as an advantage, the ombudsman stated. 

The ombudsman flagged the regulator had previously said that income drawdown is rarely suitable for pension funds of less than £100,000.  

Plus, Fos noted Mr S was not an experienced investor and was reliant upon the advice he received.

According to the ombudsman there were many requests for further information about Mr S’s circumstances from Singer about what he did after he acted on their advice and switched to a new adviser in 2011. 

These included asking for Mr S’s tax returns; details of financial advice received from a different adviser after 2010; details of an inheritance Mr S received after 2010; and details of Mr S’s current investments and financial arrangements. 

But in a final decision Terry Connor, ombudsman, said these matters are not relevant to the advice Singer gave Mr S in 2010. 

Mr Connor said: “In my view, by way of these requests, Singer is attempting to show that its advice was suitable with the benefit of hindsight. 

“I do not consider this fair or reasonable. Its advice should be judged on the information it gathered and relied on at the time it advised Mr S. 

“I am not persuaded that the suitability letter adequately explained to Mr S the advantages and disadvantages of the various options open to him. In particular, I cannot see evidence to show that an annuity option was discussed. 

“I appreciate that Singer now says that was because at the time Mr S did not indicate that he wanted to consider one because he was not interested in ‘risk free investments’. 

“But in my view, it was for Singer to set out all the options available to Mr S; it was not for him to discount one or more of the options without Singer demonstrating that Mr S understood the option he was discounting. 

“Without evidence that annuities were discussed, I am not persuaded that Singer fulfilled its obligation to Mr S in this respect. 

“I have concluded that suitable advice would have been to buy an annuity. 

Singer Financial Trust was ordered to compensate Mr S and return him to the position he would be in now but for the unsuitable advice. 

The adviser must also pay Mr S £200 for the trouble and upset caused. 

emma.hughes@ft.com