The FCA has fined Huddersfield-based Inspirational Financial Management Ltd (FRN 223511) £897,840 after it poorly advised people to transfer out of DB pension schemes, including the British Steel Pension Scheme (BSPS).

Meanwhile Arthur Cobill, an adviser at IFM, which is in administration, and William Hofstetter, one of its directors, have been banned by the FCA.

They have both been banned from advising customers on pension transfers and pension opt outs while Mr Hofstetter has also been banned from holding any senior management function at any regulated firm.

Mr Cobill and Mr Hofstetter agreed to pay £120,000 and £40,000, respectively, to the Financial Services Compensation Scheme to contribute to compensation for IFM’s customers.

The FCA said that between 8 June 2015 and 22 December 2017, IFM provided unsuitable pension transfer advice and failed to properly consider whether it would be in customers’ best interests to transfer out of their secure DB pensions.

The firm operated a contingent charging model, only collecting fees if customers transferred out of their DB pension schemes following the firm’s advice.

While this approach benefited IFM, Mr Hofstetter and Mr Cobill, it risked the long-term financial health and interests of their customers.

A review by the FCA found that 83% of IFM’s pension transfer advice failed to comply with its minimum required standards, and customers risked financial loss as a result of the poor advice they received.

Out of 307 IFM customers advised to transfer out of their DB pension scheme, 261 completed the process. Mr Cobill advised 245 of those, including 198 members of the BSPS. In total, the BSPS members advised by Mr Cobill had pension benefits worth over £90m.

Mr Hofstetter was responsible for the compliance oversight of IFM’s process for pension transfer advice.

Customers transferring out of the BSPS were already in a vulnerable position due to the uncertainty surrounding the future of their pension scheme, so it was critical that they received good advice.

In December the FSCS said it was considering claims against Inspirational Financial Management. 

The firm became authorised in July 2003 and entered administration on 30 November. From 2006 the firm also traded under the names IFM Retirement Solutions and IFM Mortgage Solutions, according to the FCA Register. From 2019 to 2022 it traded under the name Lifetime Solutions. It had previously traded under the name Will Writers (UK) Ltd between 1998 and 2002, according to Companies House records.

On its website it said: “Our team offers bespoke Financial Planning and financial advice to people in Huddersfield and throughout the north of England.” It had its assets restricted by the FCA in November 2020.

Inspirational Financial Management accounts for the financial year ending July 2022 reported that total assets of £412,507 as at July 2021 had turned into a liability of £495,129 a year later. Leeds administrators Insolvency One Limited was appointed on 30 November, prompting the FSCS investigation.

Therese Chambers, joint executive director of enforcement & market oversight at the FCA, said: “Pensions are the safety net people spend their lives building. For many customers, their DB pension was their most valuable asset, and it was their only retirement provision other than their state pension.

“As experienced advisers, Mr Cobill and Mr Hofstetter, and IFM should have known better than to unravel this. It is only right that Mr Cobill and Mr Hofstetter contribute towards compensating those affected.” 

Inspirational Financial Management Ltd is one of the firms associated with BSPS claims. Some 40 financial advice firms hit by BSPS claims have so far failed with a further seven under investigation, latest FSCS data shows. Claims relating to the 40 advice firms which went out of business before 28 February are now being handled by the Financial Services Compensation Scheme.

Compensation costs are expected to run into the millions.