According to the FCA, between March 2010 and December 2012, LJ Financial Planning (LJFP) recommended that 114 customers transfer their pensions into SIPPs without providing any advice on the underlying investments the SIPPs held.
The regulator said the investments held were “often high-risk, esoteric and illiquid.”
The total amount invested by LJFP’s customers was just over £6m.
The FCA found that LJFP failed to take reasonable care to ensure the suitability of its advice for these 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 regulator also said that between January 2013 and November 2017 LJFP also failed to ensure that it identified and managed potential conflicts of interest fairly between itself and its customers.
During this period the firm recommended Amber Financial Investments Limited as a wrap platform for its customers and that customers make investments through Tatton Investment Management, a discretionary fund manager, without disclosing to customers that it had shareholdings in these companies.
The regulator said: “In making its recommendations to customers, LJFP was required to consider not only whether a SIPP was a suitable investment vehicle for the customer based on their individual circumstances, but also whether the investments held within the SIPP were suited to the customer’s needs and appetite for risk. LJFP failed to do so. LJFP was aware that these investments were potentially high-risk, and yet was not prepared to advise customers on the underlying investments. One senior employee made clear in an email to the firm’s compliance partners that the firm did not ‘want to know’ what those underlying investments were.”
So far LJFP has paid redress of £2,668,819.97 to 41 customers.
Mark Steward, executive director of enforcement and market oversight, said: “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.
“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.”