The client, referred to as Mrs R, complained to the UK’s Financial Ombudsman Service (FOS) about advice given by Bright Financial Partnership in 2013.
The advice included the recommendation to transfer her personal pension plan to a self-invested personal pension (Sipp) which was subsequently ploughed into an overseas property development in Freedom Bay, Saint Lucia.
At the time, 43-year-old Mrs R was employed as a residential care worker earning £19,000 (€21,461, $24,470) a year, with joint savings of £800 and private property to the value of £110,000 and wanted to retire at the age of 65.
She had a deferred group final salary pension scheme benefits – which she was advised to keep and had a paid up personal pension valued at £25,297.48 and a stakeholder pension plan that her employer was paying into.
According to the adviser’s notes record Mrs R had been referred to BFP because she wanted a Sipp and to look at an “alternative investment strategy for a frozen pension …. she is unhappy with the returns she’s received over recent years.”
Unregulated property scheme
She approached the adviser, asking that her funds be invested in fractional ownerships in Freedom Bay.
However, the adviser said he would only recommend the request for a transfer into a Sipp if that was suitable for her needs and that fractional ownership of a property abroad was high-risk.
The BFP adviser also explained that it was an illiquid and unregulated product, and because of this she might not be covered by the Financial Services Compensation Scheme (FSCS) if anything went wrong with the investment.
Lack of due dilligence
However, Mrs R proceeded with her Freedom Bay investment and when it eventually went bust, she complained to FOS.
BFP rejected the complaint but the Ombudsman ruled against firm’s claims that Mrs R had already decided what she wanted to investment in St Lucia and it executed her wishes.
"I don’t think BFP could give Mrs R advice about transferring to a Sipp without also advising her about the investment it knew she intended to make – fractional ownerships in Freedom Bay,” said ombudsman Lesley Stead in a final decision.
“BFP identified that the Freedom Bay investment was unregulated. And pointed out that, because of that, Mrs R might not have recourse to this service or Financial Services Compensation Scheme if something went wrong. Unregulated investments are only likely to be suitable for more experienced or sophisticated investors. That’s why the promotion of such products is and was at the time restricted.”
FOS has now ordered BFP to pay the client the whole of the loss suffered as well as £300 for the trouble and upset Mrs R has suffered.