Was Mr M an ‘Insistent client’?

16 Mar 2017 | Comment


It is not uncommon for Independent Financial Advisors to claim that their client proceeded to transfer a traditional pension in to self-invested personal pension (SIPP) and thereafter invest that money in an unregulated investment, on an ‘insistent client’ basis. That is, that the client, notwithstanding advice to the contrary, insisted on proceeding with the transfer and the investment.

In a recent Financial Ombudsman Service decision, Ombudsman Laura Colman, upheld a complaint against Openwork and said that they were wrong to claim that their client (Mr M) would have gone ahead with a Harlequin investment as an ‘insistent client’, regardless of their failure to advise him on the Harlequin proposition, because he was acting upon the recommendation of his daughter who worked in financial compliance.

Briefly, the facts of the case were as follows:-

  • Mr M transferred approximately £111,000 from his pension in to a self-invested personal pension (SIPP) in 2009 having met with an appointed representative of Openwork.
  • In 2010 an investment in the sum of £30,025 was made, via the SIPP, in Harlequin property abroad.
  • A further £50,000 was transferred in to a managed fund.
  • By the end of 2010, the balance of Mr M’s SIPP was just under £22,000

Whilst the Ombudsman accepted that the Harlequin investment may have been introduced to him by his daughter, she did not accept that Mr M was prepared to rely solely on his daughter’s advice.

In delivering her final and binding decision, the Ombudsman made the following comments which accord with the arguments we have raised for many of our clients:

‘In my experience, consumers who seek out financial advice are unlikely to act against that advice.’

‘…a consumer’s interest in an investment does not necessarily mean they will press ahead in making the investment in the face of explicit advice about why it is unsuitable for them.’

‘..the SIPP transfer advice can’t be separated from the investment. That means that if the Harlequin investment was unsuitable, the pension transfer was unsuitable too.’

In this case Openwork were told to provide redress to Mr M including compensation in respect of the initial investment, past SIPP fees, future SIPP fees for the next five years and a payment for the distress caused.

This is an interesting decision and whilst the Financial Ombudsman Service is not bound by the doctrine of precedent, it will aim for consistency when considering future similar cases.

Latest Tweets
Our Offices

Cardiff
Hodge House
114 - 116 St. Mary Street
Cardiff, CF10 1DY
Tel: 033 0058 5077
Fax: 029 2038 8222


London
99 Gresham Street
London,
EC2V 7NG
Tel: 020 7936 3453
Fax: 020 3053 8562


Make an enquiry
ISO 9001 Management Systems BWPNG