Welcome to our new monthly newsletter, Regulation Round Up. Once a month I’ll be covering some of the main stories to come out of HMRC and the FCA, as well as anything else related to rules and regulation in financial services.
In general, the last month hasn’t offered much in the way of interesting regulatory updates. However, there is one particular story that I think is worth looking at, alongside a more general exploration of some recent decisions by the FOS which I think could be interesting to those in the UK financial planning space.
Intelligent Money Enters Administration
Intelligent Money, the SIPP provider, has entered administration following a final decision from the FOS. I haven’t found any specific information about this case, but FCA states that it was “regarding some of the investments [Intelligent Money] allowed within its SIPPs.” Due to the financial liabilities associated with this complaint and other similar complaints, the company has entered administration.
FOS Decisions
Looking for more information on the Intelligent Money case led me down a rabbit hole on the FOS website, and I found some recently upheld decisions that I think make for interesting case studies. The outcomes of some of these cases might be surprising to some and may serve as an alarm bell to change their processes.
I’ve rounded up some cases and outlined some of the most interesting parts of the decisions below, but I recommend reading the decisions in full to get a proper understanding of the cases and the ombudsman’s rationale.
DRN-4728029 – Complaint regarding annual review service
In a nutshell, the client complained that his adviser didn’t provide him with the ongoing services he had paid for. He signed up for ongoing advice in 2016, and as part of the service the adviser agreed to provide annual reviews.
The adviser emailed the client in 2017, 2018, and four times in 2019 to arrange an annual review meeting. The client didn’t respond to any emails and no meetings went ahead. In 2019, another email was sent to the client asking him to complete a form, which he replied to, but he didn’t reply to a subsequent email asking to arrange a meeting, nor any emails sent between 2019 and 2022 in which the adviser tried to arrange a meeting. It’s worth noting that the client had told the adviser that email was his preferred communication channel.
The client complained that he has paid for an ongoing service which he hadn’t received, and the FOS have upheld this complaint, ordering the adviser to pay compensation to the client. The reasoning is that the firm’s attempts to contact the client weren’t sufficient to fulfil their obligations as set out in the agreement.
DRN-4761739 – Complaint regarding annual review service
The client signed up to a service that included annual face-to-face meetings and interim review meetings, among other things. Similar to the above, the adviser made attempts to arrange a meeting, but the meetings never went ahead.
In one year, the adviser emailed the client to offer to arrange a review meeting or, if the client preferred, to just send a valuation via post. The client opted for the second option. The FOS argue that the tone of the email was leading and made it easy for the client to agree to receive the valuation “but that wasn’t the service owed to him”.
In another year, the firm sent the client a review letter and offered to meet to discuss if the client wished. The client didn’t ask for a meeting, and the FOS said that this isn’t enough for the firm to fulfil their obligations.
In 2020, the firm emailed the client to arrange a catch up meeting, and the client asked for a valuation instead as he didn’t want to see anyone due to the pandemic. No meeting went ahead. The FOS argue that the firm should have clearly offered a phone call or online meeting instead.
The firm argued that they shouldn’t be bound to provide the client with the full service if he can refuse it, but the FOS disagreed. As far as they are concerned, “The terms of the agreement were clear. They didn’t allow either party to amend its consideration.” They suggest that the firm should have renegotiated the terms of their agreement with the client and changed his ongoing service if he wasn’t going to have regular review meetings.
DRN-4654653 – Complaint regarding a personal pension transfer
This case involves a client who was advised to transfer a small personal pension to a SIPP. She was unhappy with the performance of the investments within the SIPP and wanted to sell them, but some of the underlying investments were illiquid so couldn’t be sold. The firm argued that the SIPP was opened on an execution only basis, and that, while the investments didn’t perform well, they were suitable for the client’s risk profile and objectives.
This complaint was upheld by the FOS. While there’s a lot more going on with this case, something worth highlighting is that part of the complaint relates to whether or not the recommended investments were suitable for the client.
The FOS say that the client’s attitude to risk was consistently recorded, but that she provided different information relating to income, expenditure, cash savings, and investment experience across two different fact finds. According to the FOS, this means that the information used to provide the advice wasn’t accurate or consistent, so the investments can’t be considered to be suitable.
The takeaway here is that, if there are question marks surrounding information provided by a client, you need to query it. While it can sometimes feel difficult or intrusive to ask for further information, without getting the KYC stage right you can’t be sure that your advice is suitable, and as far as the FOS is concerned it doesn’t matter that the client provided you with inaccurate information.
DRN-4732159 – Complaint regarding a personal pension transfer
Similar to the previous case, this is another pension transfer complaint. In summary, the client (61 and planning to take benefits from 67) was advised to transfer his existing pension to a SIPP and to invest in a DFM. The reasoning for this was that the new plan was significantly cheaper (excluding ongoing adviser fees), and that the old plan only offered two ways for the client to access his pension: full encashment or buy an annuity.
Two years later, he raised a complaint as he believes the advice was unsuitable and he’s suffered financially because of it.
The FOS upheld this complaint. They stated that having a wider range of ways to access the pension wasn’t a good enough reason to recommend a transfer, as the client wasn’t planning to access his plan for six years.
The FOS also stated that the pension switch wasn’t right for the client as he had no need for a SIPP, and a more basic arrangement would have been fine. Despite the new plan being lower cost (ignoring adviser fees), the FOS state that, overall, the new plan would cost more than the old plan. The FOS said that the argument that the new plan is lower cost excluding adviser charges doesn’t justify the recommendation if ongoing advice wasn’t something the client really needed, which they believe he didn’t.
The key points here are that cheaper pensions aren’t a get out of jail free card when it comes to pension transfers, and moving for more flexible pension access options is only good enough rationale if the client wants to access their pension in the very near future.
This month’s roundup highlights the importance of adhering to service agreements, the need for consistent and thorough client information, and careful consideration of cost and access options in pension transfers. These cases underscore the crucial role of detailed, client-focused advice in maintaining compliance and avoiding complaints.
Are you looking for professional support to navigate these complexities and ensure your practice meets regulatory standards? The We Complement paraplanning service is here to help. We offer comprehensive paraplanning solutions designed to enhance your advisory processes, ensure compliance, and provide tailored support for your business needs.
Stay tuned for more regulatory updates and insights next month.
Helpful Links