The Financial Ombudsman Service (FOS) has ruled in favour of a client, Mr D, who complained that in 2010 Montfort International gave him wrong advice to transfer his occupational pension policies into a self-invested personal pension (Sipp) as a precursor to moving the money into a Qrops.
Montfort International’s managing director is Qrops expert Geraint Davies, well-known for his outspoken views on overseas pension transfers.
According to the FOS ruling, Mr and Mrs D went to Montfort in 2010 for advice as they were planning to emigrate to Australia.
Montfort recommended Mr D should transfer his existing pension into a Sipp currency trading account with the intention of eventually investing it in a qualifying recognised overseas pension scheme (Qrops).
He was told this would allow a swift transition from British pounds into Australian dollars at an appropriate moment. Once a currency exchange had taken place, Montfort explained the funds could move from the Sipp into an Australian Qrops.
Mr D took Montfort’s advice and transferred many of his pension plans into a Sipp. The advice firm took a percentage of the value of Mr D’s plans on transfer, with a further annual administration charge, based on a percentage of the fund.
“These charges covered the initial transfer advice as well as other costs associated with transferring to the Qrops. It’s not clear to what extent further work might have been covered,” said FOS.
Following the relocation to Australia, Mr D’s marriage failed which meant that neither the currency transfer, nor the move to a Qrops took place and Mr D returned to the UK.
Mr D complained to the Ombudsman arguing there wasn’t any “immediate need” for him to transfer into a Sipp.
He was also concerned that Montfort’s fee has added to his loss and that his pension has remained in the Sipp, without being invested since 2010.
‘Unnecessary complication’
FOS agreed with Mr D, ruling that the advice wasn’t suitable for Mr D’s circumstances at the time and that moving the client’s pension pot into a Sipp “created an immediate loss to the funds because of the charges taken.”
The watchdog also slammed Montfort International’s advice on currency speculation, branding it an “unnecessary complication”.
“It was implied that Mr D might suffer a loss if there was a delay in switching into a Qrops; and so it was suggested denominating the Sipp in AUD would reduce the delay.
“I don’t accept that the transfer into a Sipp would have mitigated all potential losses due to exchange rate fluctuations.
“Regardless of any monitoring Montfort might have carried out, they couldn’t guarantee they would tell Mr D to switch his investment from GBP into AUD at the best moment,” said Ombudsman Louise Wilson.
She added that Mr D “remained exposed to sudden exchange rate movements, even when invested in the Sipp.”
As a result, Montfort International has been ordered to compensate Mr D and put him back in the financial position he would have been prior to following the firm’s advice.
Speaking to International Adviser, Montfort International said it was “very disappointed” with the FOS ruling, which it was currently in the process of appealing.
“We believe the advice Mr D received in 2010 was suitable for his needs at the time and could not, in any way, have foreseen his marriage failure,” said a spokesperson.
Montfort’s defence
During the case, Montfort rejected Mr D’s complaint, arguing the advice the firm provided was suitable and that it did nothing wrong.
The firm added that it was not their fault Mr D’s move overseas and his marriage failed and that it was the client who failed to invest and follow advice once he moved
Montfort also said it always discusses the issue of foreign exchange when dealing with clients who intend to emigrate as it can manage the cost of exchange issues when the fund is in a Sipp and can cover the other factor of the foreign exchange wandering.
