We have seen a sharp rise in self-invested personal pension (SIPP) complaints to the Financial Ombudsman Service (FOS). The complaints upheld and the financial liabilities have subsequently led to the collapse of some SIPP providers.
The roll call includes notable names such as Hartley Pensions, Rowanmoor Personal Pensions, Corporate and Professional Pensions among others. Last month, Intelligent Money joined this growing list of SIPP firms falling into administration.
In a public notice, the FCA said the Nottingham-based SIPP provider’s insolvency was triggered by an “an upheld final decision from the Financial Ombudsman Service regarding some of the investments allowed within its SIPPs” and that “Intelligent Money’s directors recognised the financial liabilities associated with this and other similar complaints”.
According to reports, at least 80 complaints were made to FOS against Intelligent Money, which manages about £1bn of client assets.
One of the complaints involved a customer who was advised by an IFA firm to move their £233,000 pension monies into a SIPP.
The IFA then instructed Intelligent Money to transfer £150,000 of the pension to an investment platform portfolio consisting of mini bonds, including overseas investments in real estate, car parks, renewable energy and holiday resorts.
However, the customer didn’t know that the investments were high risk and unsuitable for them.
An FCA investigation into the IFA firm later found that it was routinely pushing large volumes of similar clients into the same high-risk investments.
The customer, who was represented by a legal firm, had their complaint upheld by FOS. In its ruling, FOS confirmed that Intelligent Money didn’t do enough to protect its customers when accepting money into their SIPPs and permitting routine high-risk investments.
FOS also found that Intelligent Money’s due diligence on its high-risk investment partners was inadequate.
FOS ordered Intelligent Money to compensate the complainant for their losses. This is just one of several cases upheld against Intelligent Money.
The firm’s directors realised the hefty compensation bill and decided to call in the administrators.
However, a rescue deal was struck on the same day Intelligent Money appointed the administrators to oversee the winding down of the business.
The deal allowed Intelligent Money’s SIPPs, ISAs and general investment accounts to be transferred to Quai Investment Services. But the firm’s liabilities to the complainants were not transferred.
The Financial Services Compensation Scheme will have to pick up the compensation tab. It has already launched its own investigation into Intelligent Money to ascertain whether the firm cannot meet its liabilities.
SIPP complaints have been a perennial issue for the industry. Over the last decade, thousands of complaints have been lodged to FOS against SIPP firms. This trend will continue until action is taken to address the issues.
These include poor advice from advisers, lack of due diligence by SIPP providers and the quality of the investments that sometimes includes ‘dubious’ investment schemes abroad.
The regulator has already started clamping down on rogue actors in the SIPP industry. Most of the complaints against SIPP providers involved investments in an unregulated collective investment scheme (UCIS).
The FCA has restricted the promotion and sale of UCIS to sophisticated investors. It also won a court case against an IFA firm Capital Alternatives that was illegally operating a collective investment scheme.
It has reminded providers as part of their Consumer Duty commitments to take robust due diligence on intermediaries, assets and third parties. They must also have effective oversight of introducers to avoid foreseeable harm to consumers.
The FCA’s actions are commendable, but advisers also need to play their part to address the issue of bad investment advice.
Momodou Musa Touray is senior reporter at Money Marketing.
