The Financial Ombudsman Service ruling followed a direct marketing promotion by True Potential Wealth Management to clients of a financial adviser who recently joined the firm.
Mr H was a financial adviser who moved to True Potential Wealth Management as a self-employed agent in 2021. As a result, he was able to offer different financial products from those available when he worked in his previous role at another firm.
Mr C was an existing client of Mr H’s and had a pension with Prudential. After Mr H’s move to True Potential, Mr C was made aware of a new pension option, the True Potential Fund, through direct marketing from the company. He claimed he discussed it with his financial adviser, Mr H, on two occasions and agreed to transfer his existing pension to the new fund.
A short time later, Mr C complained to True Potential that he had been given unsuitable advice, as the new pension fund was riskier and had performed much worse than the Prudential Fund.
True Potential and Mr H denied giving Mr C financial ‘advice’, claiming the pension transfer paperwork contained a clear warning that it was a non-advised sale.
Mr C was unhappy with this decision and took his case to the Financial Ombudsman Service (FOS), the UK’s independent body for resolving disputes between financial institutions and their customers.
FOS investigation
+ −During the Ombudsman’s review of Mr C’s case, it was established that Mr H activated an online client portal during the second of their meetings. Six days later, Mr C emailed Mr H to confirm that he would like to proceed with the pension transfer based on their previous discussions. It appears that Mr H submitted the online application the following day on Mr C’s behalf using his password details and stood to make a significant commission from the pension transfer.
The Ombudsman concluded that Mr H, and therefore True Potential as his principal, had given Mr C financial advice and failed to follow certain procedures. A suitability report should have been prepared if Mr H was providing financial advice, and there was a data protection issue when Mr C shared his login details.
The Ombudsman decided that the advice to switch from the Prudential Fund to the True Potential Fund was unsuitable, and Mr C should be compensated for his financial loss. As True Potential Wealth Management ultimately held authority for the advice and pension transfer arrangements relating to Mr C’s case, it should be the one to reinstate his financial position.
Pension Mis-Selling
+ −Pension mis-selling happens when unsuitable financial advice leads to a significant loss of retirement funds. This could be because you may have invested in a high-risk scheme which has gone out of business, or you could have to pay out fees and taxes, which effectively cancel out any gains the investment makes.
Financial advisers are under a duty to fully investigate and explain the risks of pension transfers. They need to take into account your personal circumstances, such as your employment status, the date you plan to retire, and your attitude to risk. Any pension transfer recommended by a financial adviser should come with detailed documentation, known as a suitability report. According to the industry regulator, the Financial Conduct Authority (FCA), a suitability report should, at least:
- Specify, on the basis of the information obtained from the client, the client’s demands and needs;
- Explain why the firm has concluded that the recommended transaction is suitable for the client having regard to the information provided by the client;
- Explain any possible disadvantages of the transaction for the client.
TLW Solicitors and Pension Mis-Selling compensation claims
+ −Poor financial advice can cause you to lose out financially, impacting your pension pot, and you may be able to make a compensation claim. By looking at the sale process involved, we can consider all potential options to recover your lost funds.
Sarah Spruce, Legal Director and Head of the Professional Negligence team at TLW Solicitors, says:
“Losing money from an investment, particularly a retirement fund, can be extremely worrying. Mr C’s case highlights that there are strict rules in place for financial advisers to follow, no matter how longstanding the relationship you’ve built up with them is. They must act in your best interests, or face the possibility of an investigation by the Financial Ombudsman Service as happened in this case.
If you think that you or a loved one have lost out financially as a result of unsuitable pension or investment advice from an Independent Financial Adviser or Planner, get in touch with a member of my team to explore your options.”
Get in Touch – TLW Solicitors can help
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