IFA fined for unsuitable pension transfer advice

The FCA has issued a £107,200 fine to independent financial advice firm, LJ Financial Planning (LJFP), for providing its customers with unsuitable pension switching and transfer advice.

Between March 2010 and December 2012, the Warrington-based firm recommended that 114 customers transfer their pensions into self-invested personal pensions (SIPPs), without providing any advice on the underlying investments which were to be held in those SIPPs.

The FCA said these investments were often “high-risk, esoteric and illiquid”, as the total amount invested in this way by LJFP’s customers reached more than £6m.

The regulator found that LJFP had “failed to take reasonable care" to ensure the suitability of its advice for customers, who were considering whether to transfer their existing pensions into a SIPP, and who ought to have been able to “rely upon its judgment” in relation to the suitability of this transfer, the FCA stated. This was found to be in breach of Principle 9 of the FCA’s Principles for Businesses.

Between January 2013 and November 2017, the FCA revealed the firm had also failed to ensure that it had identified potential conflicts of interest fairly between itself and its customers, which was in breach of Principle 8 of the regulator’s Principles.

FCA executive director of enforcement and market oversight, Mark Steward, commented: “Investors should be able to trust their financial advisers with the pension contributions they’ve built up over a lifetime of hard work.

“These failings were especially serious because LJFP facilitated the transfer of these investors’ pensions into high-risk investments without assessing whether the investments were suitable for investors.”

To date, LJFP has paid redress of £2,668,819.97 to 41 customers who have been impacted by the failing. The FCA said the firm will be conducting a customer contact exercise in relation to the remaining customers, in order to assess their eligibility for redress.

Steward continued: “In many instances, these investments are now worthless and many investors are approaching or already in retirement and so especially vulnerable to the risk of significant losses.

“Redress is important but these investors should never have been placed in this position in the first place. Investors should also be able to rely on their financial advisers to manage conflicts fairly and to disclose them so investors are able to make better informed decisions.”

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