Financial Planning firm Insight Financial Associates has been fined after failing to advise on a property investment when recommending a SIPP switch in 2010.
The Financial Ombudsman Service said that Insight failed in its duty to fully scrutinise the investment its client was planning to make when switching to the new SIPP.
The FOS ordered the firm to reimburse the client (Mr K) and to pay an additional £250 for the trouble and upset caused.
The Ombudsman also ordered Insight to pay Mr K an upfront sum equivalent to five years’ worth of fees on a proportion of the SIPP represented by the 2010 investment.
In 2010 Insight advised the client, Mr K, to transfer his existing SIPP to a new SIPP to make an unregulated overseas property investment.
In 2018 Mr K made enquiries about selling the investment to access funds for his retirement but discovered it was unlikely the property could be sold.
He complained to Insight, and later the FOS, saying that the investment was too high risk, and unsuitable for his purposes.
Insight said it was not responsible for advising on the property investment, and that Mr K had already decided to buy it when he arranged the SIPP. The firm said it only provided advice on a suitable SIPP to hold the investment, and said its advice was appropriate.
The Ombudsman said it was not possible for insight to act in Mr K’s best interests and give suitable advice without taking into account the SIPP’s underlying investment. In this case an overseas property investment that was an unregulated collective investment scheme.
As Mr K had no experience of this type of investment and his circumstances did not suggest her was suited to the risks the investment presented, the ombudsman said Insight’s advice to proceed with the SIPP and its associated investment was unsuitable.
Ombudsman Caroline Stirling said: “Insight had a duty, in line with Financial Conduct Authority (as it now is) rules, to advise him on the suitability of the new SIPP and the investment he was planning to make within that wrapper. Insight’s advice should have included an analysis of whether it was appropriate for him to remain invested in his existing SIPP, rather than transferring to a new SIPP for the purpose of investing in overseas commercial property. For all the reasons given in my provisional decision, and reiterated above, I do not think Insight gave suitable advice in that regard, as required by the regulator.”
Insight stopped acting as Mr K’s adviser in 2011.