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Collapsed Greyfriars adviser owes clients £700k

Collapsed Greyfriars adviser owes clients £700k

Advice firm Consumer Wealth had amassed £700,000 worth of claims by May this year after going bust a few months before.

The adviser went into liquidation in February and documents published on Companies House this week (dated May 23, 2019) showed Consumer Wealth had complaint liabilities of £699,643 owed to a total of 37 consumers. 

The firm also owed £14,649 to the Financial Conduct Authority, £70,656 to its administrators RSM Restructuring and £31,185 to trade and expense creditors.

A smaller amount of £100 was owed to the taxman but the company did not owe any money to its former employees.

The liquidators estimated Consumer Wealth had £81,191 in available assets to pay its creditors, meaning £735,042 would be left outstanding. 

At the time of going bust the firm was facing 12 complaints submitted to the Financial Ombudsman Service, in addition to one which was upheld in favour of a client who was advised to invest in a fund run by the now insolvent Greyfriars Asset Management. 

In July the Financial Services Compensation Scheme announced it would accept claims against the advice firm, finding many of its customers had been advised to invest in high risk and non-standard investments, many of which are now illiquid. 

The scheme has not yet declared the firm in default however, meaning it will not start processing claims at this stage.

The FSCS declares a firm in default when it is satisfied it won't be able to meet the claims made against it. This would see other pending claims rerouted to the FSCS.

When the FSCS announced it was accepting claims against Consumer Wealth in July it confirmed to FTAdviser it had received 56 claims but more were expected. 

The claims concerned investment portfolios, pension advice and personal pension transfers.

According to the FSCS the advice firm advised some of its customers to switch their existing personal pensions to self-invested personal pensions, as seen in the successful complaint submitted to the financial ombudsman against Consumer Wealth.

The case was brought by a client who was advised to switch two personal pension plans, valued at almost £58,000, to a Sipp, with Consumer Wealth recommending he invest 49 per cent of the Sipp into an equity fund and 49 per cent into the GAM Portfolio Six fund. The remaining 2 per cent was held in cash.

Ombudsman Keith Taylor found the GAM Portfolio Six fund was made up of "niche" investments such as overseas hotel rooms off plan, property development of grade listed buildings in Germany and the development of a waste treatment and energy recovery facility in Wales.

He said: "These niche investments offer relatively high returns which generally is an indicator of the underlying investment risk. These investments were also unregulated and I wouldn’t expect to see this proportion of a pension fund invested like this.

"So whilst the investments had been amalgamated into a single fund, I don’t think it makes it suitable to investment virtually half of Mr F’s pension in a fund like this."