Release Date: 10th December 2020
To access the original FCA document, click here.
Summary
The Financial Conduct Authority (FCA) has fined LJ Financial Planning Ltd (LJFP) £107,200 for providing unsuitable pension switching and transfer advice, and for failing to manage conflicts of interest. Between March 2010 and December 2012, LJFP recommended that 114 customers transfer their pensions into self-invested personal pensions (SIPPs), without advising on the high-risk, esoteric, and illiquid underlying investments. The total amount invested this way was over £6,000,000.
LJFP was required to ensure that both the SIPP and the underlying investments were suitable for customers based on their individual circumstances. However, LJFP failed to do so, explicitly stating they did not want to know what the underlying investments were. This negligence breach Principle 9 of the FCA’s Principles for Businesses.
To date, LJFP has paid £2,668,819.97 in redress to 41 customers affected by this failing and will be contacting the remaining customers to assess their eligibility for redress. Additionally, between January 2013 and November 2017, LJFP breached Principle 8 by failing to manage potential conflicts of interest fairly. The firm recommended Amber Financial Investments Limited as a wrap platform and Tatton Investment Management as a discretionary fund manager without disclosing its shareholdings in these companies to customers.
Mark Steward, FCA Executive Director of Enforcement and Market Oversight, emphasised the seriousness of LJFP’s failings, highlighting that investors should be able to trust their financial advisers with their pensions. Many of these high-risk investments are now worthless, leaving many investors, who are approaching or already in retirement, vulnerable to significant losses.
Key Takeaways:
- Suitability of Advice: Ensure both the investment vehicle and underlying investments are suitable for the client.
- Conflict of Interest Management: Disclose any potential conflicts of interest to clients.
- Client Communication: Provide clear, fair, and comprehensive advice and information to clients.
- Ongoing Monitoring: Maintain adequate oversight and control mechanisms to ensure compliance with regulatory standards.
In conclusion, LJFP’s significant failings in providing unsuitable investment advice and managing conflicts of interest resulted in substantial financial harm to their clients. The FCA’s fine and the requirement for redress underline the importance of transparency, suitability, and effective management in financial advisory services.
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