UK advice company LJ Financial Planning (LJFP) has been fined £107,200 ($143,344, €118,663) by the financial regulator for providing its clients with “unsuitable” pension transfer advice and “failing to manage its conflicts of interest”.
The Financial Conduct Authority (FCA) found that, between March 2010 and December 2012, the Warrington-based firm recommended 114 customers to transfer their pensions into self-invested personal pensions (Sipps), without providing any advice on the underlying investments which were to be held in the Sipps.
These investments “were often high-risk, esoteric and illiquid”, according to the FCA. The total sum invested in this way by LJFP’s customers was just over £6m.
Also, between January 2013 and November 2017, LJFP “failed to ensure that it identified and managed potential conflicts of interest fairly between itself and its customers”.
During this period, LJFP recommended Amber Financial Investments as a wrap platform for its clients and that they make investments through DFM firm Tatton Investment Management without disclosing to customers that it had shareholdings in these companies.
Findings
The FCA said: “In making its recommendations to clients, LJFP was required to consider not only whether a Sipp was a suitable investment vehicle for the customer based on their individual circumstances, but also whether the investments held within the Sipp were suited to the customer’s needs and appetite for risk.
“LJFP failed to do so. It was aware that these investments were potentially high-risk, and yet was not prepared to advise customers on the underlying investments. One senior employee made clear in an email to the firm’s compliance partners that the firm did not ‘want to know’ what those underlying investments were.”
The UK regulator also found that LJFP “failed to take reasonable care to ensure the suitability of its advice for these customers”.
To date, LJFP has paid redress of around £2.7m to 41 customers who have been impacted by the transfers, and it will conduct a customer contact exercise in relation to the remaining clients in order to assess their eligibility for redress.
‘Redress is important’
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Investors should be able to trust their financial advisers with the pension contributions they’ve built up over a lifetime of hard work.
“These failings were especially serious because LJFP facilitated the transfer of these investors’ pensions into high-risk investments without assessing whether the investments were suitable for investors.
“In many instances, these investments are now worthless, and many investors are approaching or already in retirement and so especially vulnerable to the risk of significant losses.
“Redress is important, but these investors should never have been placed in this position in the first place. Investors should also be able to rely on their financial advisers to manage conflicts fairly and to disclose them, so investors are able to make better informed decisions.”
