The Financial Conduct Authority (FCA) has heavily criticised 1 Stop Financial Services for the way it provided pension advice to many of its clients.
For a two year period between October 2010 and November 2012 1 Stop advised nearly 2,000 clients to transfer their occupational and/or private pensions into SIPPs. Those SIPPs then invested in high risk and highly speculative unregulated products, such as overseas properties (for example the Harlequin development).
During this two year period 1 Stop were involved in transferring sums in excess of £112million.
Given the high risk and highly speculative nature of these unregulated SIPP investments, such investments were often completely inappropriate for some clients, and as a result many of 1 Stop’s former clients are now likely to have lost significant sums of money.
The FCA had found that in many cases 1 Stop had failed to adequately clarify what the clients’ investment aims and objectives were, or what the clients’ attitude to risk was – this being particularly important given the high risk associated with some of the SIPP investments.
1 Stop had suggested that it was only responsible for setting up the SIPP however, it also had a very clear duty to advise its clients on the risks associated with the underlying SIPP investment, which 1 Stop failed to do.
Tracey McDermott, the Director of Information and Financial Crime at the FCA said:
“By enabling customers to invest in unregulated and often high risk products without assessing suitability [1 Stop] exposed customers to the risk of losing their hard earned pension funds. This was confounded by [1 Stop’s] failure to ensure that [its] customers fully understood the risk.”
Malcolm Evans, Partner at Hugh James solicitors, and currently acting for over 50 clients said:
“Many of the clients I represent were given bad advice about these investments and false promises were made about the returns they could expect from these investments. Had these clients not transferred their funds into these high risk products they would have been looking forward to a comfortable retirement. These very same clients now face financial uncertainty in retirement.”
The FCA recognise that there may be significant liability for redress for 1 Stop’s customers which will now fall to the Financial Services Compensation Scheme (FSCS) and the amount of any such liability is currently being investigated by the FSCS.