After following financial advice, Mario switched his pension and put significant savings into an unregulated collective investment scheme.
What happened
Mario wanted more control over his pension. He spoke to an independent financial adviser, who carried out a ‘fact find’.
The fact-find recorded that Mario wanted to choose where to invest £60,000 of his pension savings, which left around £35,000 to be invested in funds recommended by his adviser.
The adviser noted Mario’s interest in shares and speculative investments. He recommended Mario change his personal pension plan to a self-invested personal pension (SIPP).
Mario accepted the advice and switched his pension. He invested £60,000 in oil and gas through an unregulated collective investment scheme (UCIS). The remaining amount was invested in funds selected by the adviser.
Later, Mario complained to the adviser that the UCIS was an unsuitable investment.
The adviser said he hadn’t advised Mario to invest in the oil and gas UCIS. He said Mario wanted to make this investment and would have done so regardless. Mario asked us to look into his complaint.
What we said
The Financial Conduct Authority (FCA) has made it clear that when advising on a pension switch, an adviser must determine whether it is suitable.
The adviser knew Mario wanted to invest a large part of his pension savings (potentially more than 60%) into speculative investments. But the oil and gas UCIS Mario chose was unregulated and had significant risks.
This type of scheme is usually only suited to high-net-worth or experienced investors. Even where such investments are suitable, the FCA has said they should only make up 3% to 5% of an overall portfolio.
We thought Mario’s circumstances and limited investment experience demonstrated that a UCIS wouldn’t be suitable for him.
The adviser should have done more to understand Mario’s circumstances, investment experience and objectives So, we thought that the adviser didn’t act fairly in advising Mario.
We decided suitable advice would have been for Mario to keep his existing personal pension plan. We didn’t see any evidence to suggest that he would have rejected such advice.