The “FoS-Financial Ombudsman Service” has provided satisfactory details why most financial advisors were guilty of the various pension mis selling complaints raised in the recent past. Through its newsletter on Nov 7, 2018, the FoS pointed out common reasons raised by investors and savers on how the financial advisors got it wrong. Since the 2015 pension freedoms, the FoS has received a total of 318 pension transfer complaints, but only 33% were upheld. Some of the pertinent issues raised by the complainants include poor legacy advice, poor investment options, and advisor delays.
The FoS also pointed out that delays comprised the highest percentage of the pension transfer complaints. A section of the complainants blamed advisors’ delay for missing out viable and higher transfer values. The other major areas of complaints were the suitability of financial advice and administration. Unregulated pension advisors have also influenced a number of people to engage in unfavourable pension transfers. Unfortunately, the latter complaints cannot be remitted by the FoS and the victims might not get back their funds.
One of the cases lost by advisors involved a female client who wished to receive her pension pot and invest in a newly established business. Based on the FCA guidelines, it is not suitable for UK citizens to transfer pension funds out of a DB scheme. The suitability report issued by the financial advisor also pointed out that the transfer was not a viable idea. The advisor pointed out that he had discouraged the transaction but the client was insistent. In the particular pension mis selling claim, the female client explained that the process was quite long and tedious. The client also pointed out that she was forced to quit her part-time job and purchase a van, only to be informed very late that then transfer was not viable.
After reviewing the case critically, the FoS pointed out that the financial advisor had no solid reasons for the delays and he failed to make things clearer in the first meeting about how they could have assisted the client to transfer her pension. Based on the inconveniences caused, the FoS ordered the financial advisor to compensate the client in a moderate band of £500 or less.
In another case, a male client had been provided with a 3 months window in which to assess and complete a boosted transfer value. However, the advisor failed to inform the male client that they could not handle the query and the client had to contact the advisor severally for answers. Once the client received assistance from another advisor, he learned that it was quite late to perform an appropriate assessment and the transfer value was lowered by £50, 000. The FoS held that the financial advisor would have informed the male client that they could not have handled his query due to timelier fashion. The FoS ordered the financial advisor to pay £50, 000 to cover the gap between the two transfer values. The advisor had also to factor in the income dedications and the investment growth.
In another case, FoS established that a female client had lost DB benefits guarantee after receiving misleading advice from a financial specialist. Based on the FCA guidelines, the FoS ordered the advisor to pay redress money. In another case that favoured the financial advisor, FoS found that a female client had unjustly accused the financial advisor of providing misleading pension transfer advice. The woman had complained about advice she had received a couple of years back to have influenced her not to transfer the pension but the FoS affirmed that the advisor had no case to answer. The FoS also projects that the pension mis selling cases are likely to increase substantially in the first quarter of 2019.