Successful Claim for Client Who Paid Ongoing Trail Commission After Adviser Retired

Mr S held a personal pension plan with Standard Life, set up by MPA Financial Management Limited (MPA). He received advice from MPA in February 2012 (before the RDR changes) and set up the pension with a £12,500 lump sum investment and £625 monthly contributions. He paid a 2% commission on the lump sum, followed by an ongoing annual fee of 0.75% of the fund value. Mr S and MPA agreed that he would receive an annual review of his pension in return for the ongoing charges. MPA provided the annual review until 2017 when the adviser retired. After this, Mr S had no contact from MPA.

In a statement from Standard Life in April 2022, it was clear that Mr S was continuing to pay for ongoing advice through the trail commission. Upon contacting MPA and querying the lack of contact, they apologised and offered to pay around half of the commission Mr S had paid between 2018 and 2022 (£500). Mr S did not accept this and asked for a full refund of the fees. MPA reminded Mr S that they were entitled to collect the ongoing fees without providing any ongoing service and offered to refund £750.

Mr S didn’t agree with their decision and took his complaint to the Financial Ombudsman Service (FOS), the independent body responsible for settling disputes between FCA regulated financial businesses and their customers.

A Financial Services Ombudsman (FOS) Investigator reviewed Mr S’s complaint. Whilst they agreed that MPA had no obligation to provide ongoing service whilst collecting fees (for investments set up before the end of 2012), that was not the agreement Mr S and MPA had entered into. The FOS Investigator recommended that MPA refund Mr S all the fees he had paid, plus 8% interest, for the years when the annual pension reviews had not taken place.

The case was also reviewed by a FOS Ombudsman, who upheld the Investigator’s decision. Their role is to assess what is ‘fair and reasonable’ in the circumstances and their decision is final.

The Ombudsman highlighted that there was a clear agreement between Mr S and MPA about the provision of an annual review, including a yearly telephone meeting, unlimited email access to the adviser, portfolio management and being kept up to date. The ongoing fees were an agreement between Mr S and MPA and were not an “integral part of Standard Life’s product charges”, meaning Mr S could have asked Standard Life to stop paying them.

MPA’s failure to allocate a new adviser to Mr S after the previous adviser’s retirement meant Mr S had not received the agreed service he was paying for and, therefore, had not been treated fairly.

The Ombudsman ordered that MPA refund the commission it had been paid from 2018 to 2022 and, given the money came out of Mr S’s pension pot, calculate the lost investment return on each commission payment and include that in the refund due, also.

Current and former clients of firms that have been charging ongoing advice fees but not providing ongoing advice service may be eligible to claim compensation, including a refund of the overcharged fees, the loss of growth to the funds, and interest.

Working on a ‘no-win, no-fee’ basis, our team of experienced pension and investment lawyers can help you through the claims process. Some claims are settled successfully directly with a financial adviser, while others can be progressed through the Financial Ombudsman Service.

Sarah Spruce, Legal Director at TLW Solicitors, says:

“Just as solicitors help us navigate complicated legal processes, financial planners and advisers are trusted specialists who help us understand pensions and investments. We rely on them to manage our money on our behalf and to always have our best interests at heart. The old way of charging commissions wasn’t clear enough, so the FCA changed the whole industry model, introducing up-front fees set by the adviser. This means we can shop around and find an adviser who offers a value-for-money service.

“But many of us have old pensions and investments which were set up years ago, and we might not pay too much heed to the annual statements. Have you checked to make sure you are not paying for an ongoing service that you don’t receive? I would urge everyone to dig out their statements and double-check or ask an independent financial adviser to review their portfolio. If you have been paying for ongoing advice and haven’t received any or all of what was agreed, as in Mr S’s case, you too might be able to make a claim.”