Redress to be paid after advice to invest in unregulated Brazilian property scheme

Miss D - as referred to by the ombudsman - said she was given unsuitable advice to transfer her occupational pension scheme (OPS) and personal pensions to a self-invested personal pension (SIPP).

She was advised by specialists pensions firm Heather Dunne IFA, an appointed representative of Financial Solutions Midhurst Limited, (FSML) to transfer into Whitesands Brazilian Project, an unregulated investment scheme.

According to news website LoveMoney the venture never went past initial architectural plans. The scheme took £14m from investors and reportedly used former Manchester United footballer Lee Sharpe to market it.

'Exceptionally high risk'

On 23 August 2012, Miss D filled out a pension transfer questionnaire. Examples of her answers included that she did not expect to retire early and that she would like to consolidate her pension benefits.

The form probed Miss D's attitude to risk, where she confirmed she had a high level of understanding and she was not concerned about drops in value as she expected to recover any falls.

On 8 October 2012, FSML issued a report to transfer the funds into a SIPP and, on 18 January 2013, £86,118 was invested into Whitesands.

Four years later in 2016, Miss D complained the SIPP was not suitable, that her funds were misused and that FSML failed to undertake due diligence in respect of the "unregulated introducer and the unregulated investment". FSML disagreed with the complaint and she was referred to the ombudsman. 

Miss D told the ombudsman the adviser was recommended to her and, even though she knew nothing about pensions, she trusted him.

An adjudicator at the time said Miss D could not afford to take the "exceptionally high risks" involved with investing in Whitesands and that FSML failed to give suitable advice.

In response, FSML said: "The findings rely on a number of inappropriate things such as an unsigned and undated questionnaire prepared by our service years after the event." It said the FOS had not gathered all the relevant information.

Liability

After reviewing the relevant information, the ombudsman said FSML appeared to have used the pension review questionnaire sent to it by an unregulated introducer to get to know Miss D's circumstances and attitude to risk.

Even though the form went someway to establishing her risk attitude, FSML fell short in terms of establishing her wider circumstances. The FOS said: "Among other things, FSML had to know its client, act in her best interest and give suitable advice.

"I have not seen anything that would indicate Miss D was an experiences investor or that she could afford to take significant risk with her pensions."

The initial decision was upheld in April this year but FSML pushed back and disagreed with the ombudsman. As a result it went to the ombudsman for a second decision but the complaint was still upheld and FSML. At that point the FOS reiterated that Miss D should be put back into the position she would be in had the advice been suitable. 

There is a chance, however, the liabilities incurred following the complaint will fall onto the Financial Services Compensation Scheme.

Heather Dunne IFA stopped carrying out pension transfer business in July 2017 following scrutiny from the Financial Conduct Authority over defined benefit (DB) transfers. The following year, it was announced that Dunne would re-enter the market as Heather Dunne Consulting.

However, in September 2018, that firm entered liquidation after its principal restricted pension transfer permissions. FSML, meanwhile, has filed for voluntary liquidation, according to Companies House.  

This article was first published by Professional Adviser, a sister title to International Investment.

Subscribe to International Investment's free, twice-daily, newsletter