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How we defended a pension transfer complaint to help keep a business sale on track

These days, a complaint could land on your desk at any time. So, to understand how we could support you in such an event, the following case study shows how we helped a client defend a potentially costly pension transfer complaint, keeping an agreed business sale on course.

Client sought £420,000 compensation for a historical pension transfer

Mr A filed a complaint against his financial adviser seeking £420,000 compensation for a pension transfer made 18 years earlier, in 2006.

The financial adviser had 25 years’ experience, and had never before received any form of complaint.

The adviser was very stressed. He’d had no professional indemnity (PI) insurance for DB transfers since 2017, and his concern was significantly heightened because he was in the process of selling his business. The complaint had the potential to derail the agreed sale.

Due to the timing of the complaint and the sale of his business already successfully negotiated, the adviser told us that he was prepared to settle for £100,000.

He asked for our help and immediately sent over the client file.

Complaint

Mr A complained that the adviser allowed him to make a pension transfer to invest in a Cyprus property company, despite instructing the firm to do so.

Action

We very quickly found that the complaint had no grounds.

The adviser had carried out a diligent fact-find and executed Mr A’s wishes, even though it went against their advice.

We had three clear routes of defence:

1. Insistent client

    The conversation between Mr A and the adviser focused on the Cyprus property investment that Mr A wished to make. Detailed notes showed:

    “(Mr A) only wishes to discuss utilising his pension funds to enhance his property portfolio. In particular he wants to buy a stake in a Cypriot property company that he has researched.

    “(Mr A) does not wish to disclose his income and expenditure. He says he has a good income over and above his expenditure. (Mr A) does not wish to disclose the details of his assets and liabilities. He owns his own home and has a 10 property portfolio valued at £1.5 million. He has a lot of experience in property and sees this as his pension plan in the future.”

    The adviser wrote:

    “After taking into account all of the above factors and even taking into account your attitude to risk it is our recommendation that you do not transfer from your existing Local Authority Scheme; You will lose a number of benefits as outlined and the critical yield figure of 10.4%, to equal your existing scheme, is above the percentage that we would feel reasonable for investment return over a medium or long term.”

    Despite this advice, Mr A remained adamant that he wanted to proceed. So much so that he drafted and signed an insistent client letter, without encouragement.

    We also detailed the very tight time frame over which events unfolded.

    Ultimately, from initial client meeting through the “insistent letter” and completion of applications, only nine weeks elapsed.

    2. Time barred

    In addition to the “insistent client” argument, the complaint was also ineligible as it was raised outside the regulated time limits.

    Typically, you need to complain within six years of a problem happening.

    In this case, the recommendation was made in October 2006, while the complaint was lodged 18 years later.

    Read more: When do the time barring rules apply?

    We also took the opportunity to stress that it was on record that the adviser did not recommend the transfer. Additionally, we demonstrated that Mr A did not want wider financial advice, ongoing advice, or regular performance reviews.

    The investment terms of business letter, which Mr A reviewed, stated: “With regard to investments we have arranged for you, these will not be kept under review unless we have been specifically asked to do so by you.”

    3. Redirecting the complaint to the pension provider

    Taking a belt and braces approach, our final defence was that the complaint should be directed to the pension provider operating Mr A’s SIPP.

    We pointed out that SIPP operators have a duty to conduct appropriate due diligence on investments before they can be held in a SIPP.

    Given the specifics of the complaint, we also took the opportunity to cite Financial Ombudsman Service (FOS) decisions in two prior cases.

    Outcome

    The adviser was keen for the problem to go away quickly and had previously said he’d be willing to pay £100,000 to protect an agreed sale of his business.

    In light of the adviser wanting to clear the matter up without delay, having laid out our arguments, we offered to pay £1,500 as a gesture of goodwill, with no liability, as long as the complaint was withdrawn promptly.

    The matter was resolved that week.

    The whole process took around 10 weeks, cost the adviser £5,000, and he went on to sell his business successfully.

    Key takeaways

    Even highly qualified and experienced financial advisers can find themselves facing a complaint

    In this case, the adviser had 25 years’ experience and an unblemished record. Despite this, he found himself having to defend a complaint as he prepared to sell his business and enjoy retirement.

    Don’t rely on the Financial Ombudsman Service sticking to the time barred rules

    This complaint was made 16 years after the event.

    Ordinarily, this would mean that it fell outside the typical six-year requirement. However, knowing that the Ombudsman don’t always adhere to these rules, your best course of action is to investigate thoroughly and present a robust defence that covers all areas of the lodged complaint.

    Mounting a successful defence often relies on your client file

    When it comes to record-keeping, it pays to be fastidious.

    Keeping detailed notes and records can help ensure comprehensive client files, and could be key in helping you uncover the facts of the case.

    Your client file is where we start our investigations and often provides much of the evidence needed to draft your response.

    Get in touch

    Jencap Partners ensure a pragmatic approach to dispute resolution. From evaluation of the complaint to the “final response”, and beyond, we take care of every aspect of the process.

    Find out more about how we could help you resolve a complaint by talking with one of our experts.

    We’d be delighted to answer your questions. Please email mail@jencap.partners, book a short call by completing our online form, or call 029 2000 2325.