Financial Advisors reviewing finances

Lloyd Pope, a director of failed advisory firm TailorMade Independent (TMI) has been fined over £23,000 by the FCA for failings which allowed clients to invest over £100 million of pension assets in high risk investments.  These included green oil, biofuels, farmland and overseas property operated by Harlequin, which is under investigation by the Serious Fraud Office.

Mr Pope has been banned from holding a position of senior management at a regulated business since 2015. Other former directors of TMI have also been fined and banned for their involvement in the business.

TMI arranged Self Invested Personal Pensions (SIPPs) for clients between 2010 and 2013. Most of these clients had been referred to TMI by an unregulated introducer, which was paid commission by the investment provider. Some of the stakeholders in TMI also had financial interests in the unregulated introducer. TMI’s role was to give advice to the clients on the most suitable SIPP product, but crucially did not provide any advice on the clients’ underlying investments. However members of TMI were also receiving commission from the investment providers via the unregulated introducer, which created a conflict of interest.

The result was that clients transferred their pension savings into unsuitable investments, many of which would not have been permitted by their existing pension schemes.  Many of the investments failed, leading clients to face losing their pension funds.

The FCA said that: “Mr Pope failed to take reasonable steps to ensure that the business of TMI, for which he was responsible in his controlled functions, complied with the relevant requirements and standards of the regulatory system.”  It says that he failed to understand the underlying products and had not performed a risk assessment. As a result “TMI would not have been able to conclude whether the products were suitable for TMI’s customers.”

James Burgoyne, Director – Claims & Technical of Brunel Professions says that pension transfer business has proved to be a challenging area for financial advisers and their insurers for three decades now.  “There are many outstanding advisers who provide excellent pension transfer advice to their clients; however the amounts of money involved are often very large, which coupled with recurrent regulatory intervention, makes professional indemnity insurers wary of the sector.  The small number of advisers who provided inadequate transfer advice on a large scale have had a significant impact on the sector as a whole.”

The FCA’s press release announcing the ban has been published on its website.  Reports about the case have been published by FT Adviser and Pensions Age.

Brunel secures competitive professional indemnity insurance cover for financial services professionals.  To find out mo