SiPP Firm Punished For UCIS Advice Failings

A milestone finding by the Financial Ombudsman Service (FOS) has ruled a self-invested personal pension (SiPP) provider is responsible for policing the standards of investment advice offered to consumers by third party advisers.

The ruling followed a complaint from a retirement saver who switched a £29,000 pension fund into an unregulated collective investment scheme (UCIS) which subsequently collapsed, leaving the investor to lose all his cash.

The provider, Berkeley Burke, refused the consumer’s complaint which was referred to the FOS.

The firm was ordered to repay the lost funds, any fees related to the case and £500 for distress and inconvenience.

The money was put into Sustainable AgroEnergy after the consumer was told about investment by an unregulated salesman who he thought was a financial adviser. The firm then went into administration and the investment was lost.

Berkeley Burke argued that they had offered no advice and explained the risks involved in the investment.

SiPP industry shake-up

SiPP providers are expected to change their due diligence policies to follow this ruling in a major shake-up of the market aimed at protecting consumer rights.

The FOS found that the SiPP provider had flouted Financial Conduct Authority (FCA) guidelines demanding providers confirm agents advising their clients were authorised by the FCA and that they identify unsuitable investments in their SiPPs.

The ruling appears to be part of concerted action by regulators against financial firms and providers involved in the SiPP market.

The Financial Services Compensation Scheme (FSCS) has just declared four financial advice firms selling SiPP investments in default so investors who have lost money can claim compensation.

“We are seeing claims against advice firms that have stopped trading who recommended consumers transfer personal pensions to SiPPs,” said an FSCS spokesman.

“We expect to see a lot more of these cases in the near future.”

Poor advice from advisers

The four firms in default are:

  • TailorMade Independent Limited
  • 1 Stop Financial Services
  • Kynaston-Carnoustie Financial Consultancy Limited
  • Crawford Scott Limited

In April, the FCA banned Andrew Rees and Timothy Hughes, partners at 1 Stop Financial Services, for giving poor advice to more than 2,000 customers on transferring pension investments of more than £112 million.

The pair was ordered to pay the FSCS £490,100 to compensate their customers.

The FCA also warned financial firms over offering unsuitable SIPP advice after an investigation found “serious and ongoing” failings in the market.

The regulator revealed advisers were recommending investments based on the product rather than considering the customer’s attitude to risk and whether the investment matched their financial goals

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