A recommendation that a client switch his investments into a structured note and four funds has resulted in an ombudsman ruling against DeVere & Partners UK.
The complainant, known as Mr F, transferred two existing pension plans into a qualifying recognised overseas pension scheme (Qrops) under the advice of a separate business when he was living in Cyprus.
The unnamed firm managed the scheme between 2010 and 2014, when Mr F moved back to the UK.
At the time of the move, the value of the Qrops had dropped by £12,000 from the initial £61,000 ($78,290, €68,258) transferred from Mr F’s two pensions.
Fees and charges
In April 2014, he met with a DeVere UK adviser who recommended that Mr F sell all his investments and reinvest in the structured note and four funds.
In January 2018, however, Mr F was told that DeVere UK’s minimum fee would be increasing to £1,000 per year.
In response, Mr F complained that he was unhappy with the performance of his investment and was not prepared to lose any more of his pension through paying fees.
He wanted to transfer to another provider but says he was told it would cost £14,000 in fees to do so, in accordance with the trustee’s exit charges put in place when the Qrops was set up by the Cyprus-based firm.
This left Mr F between a rock and a hard place; choosing either to pay the annual fee or incur the high exit charges.
The Financial Ombudsman Service (FOS) investigator was unable to assess the actions of the Cyprus-based business in recommending the initial Qrops; as the firm was not regulated by the Financial Conduct Authority.
However, he thought the investments recommended by DeVere UK were not suitable for Mr F given his circumstances and attitude to risk.
In a perplexing twist, DeVere UK submitted an attitude to risk (ATR) questionnaire to the FOS, as part of its investigation, that was neither dated nor signed.
In the ATR, Mr F’s risk appetite is ranked as a three out of 10, but this was later changed to a five out of 10 when DeVere UK wrote to Mr F to confirm its recommendations.
The firm told the ombudsman service that the questionnaire was a “red herring and should be ignored”. The document was described as a starting point for further discussion before the actual risk appetite was agreed.
Despite this, the FOS investigator concluded that the ATR questionnaire is the one that was completed during the initial meeting in April 2014.
“I don’t agree, as DeVere has suggested, that this questionnaire should be ignored,” the investigator wrote in his report. “I haven’t seen any evidence to show why DeVere changed Mr F’s ATR from three, as agreed on the questionnaire, to five when it wrote to him to confirm its recommendations.”
No previous complaint
DeVere UK did not agree with the FOS’ findings.
In summary, the financial advice firm said that it is a matter of opinion where a portfolio falls on the risk scale and that the firm had met its obligations because it had assessed Mr F’s attitude to risk.
It added that the structured note had a defensive outlook and was included to diversify the portfolio.
DeVere UK also said that Mr F had not previously complained about the advice he received.
The FOS investigator agreed that it was possible Mr F would not have complained if it wasn’t for the losses his investment made before responsibility passed to DeVere UK. But, as it formed part of the complaint passed to the FOS, “it’s right for us to consider whether the advice [Mr F] received from April 2014 onwards was suitable”.
A spokesperson for DeVere UK, which is a separate legal entity to DeVere Group, told International Adviser: “We are disappointed by the ombudsman’s decision in this case but will abide by it.”
Taking in account Mr F’s limited investment experience and strong reaction to past losses, the investigator concluded that he was very uncomfortable with any loss.
“My aim is that Mr F should be put as closely as possible into the position he would probably now be in had he been given suitable advice,” the investigator wrote.
The FOS outlined the methodology DeVere UK should use to assess the level of compensation but did not specify a figure or range.