December 10, 2020, | AtoZ Markets – The Financial Conduct Authority (FCA) has announced a £107,200 fine on LJ Financial Planning (LJFP) for providing its customers with unsuitable pension switching and transfer advice and for failing to manage its conflicts of interest.
FCA fined LJ Financial Planning Ltd for providing its customers with unsuitable transfer advice
Based in Warrington, LJFP advised 114 customers to transfer their pensions into self-invested personal pensions (SIPPs) between March 2010 and December 2012.
The firm did not provide any advice on the underlying investments that were to be held in those SIPPs, the FCA said, and the investments were often high-risk, esoteric, and illiquid.
According to the FCA, when advising the clients, LJFP failed to consider not just whether a SIPP was suitable, but also whether the investments held within that SIPP were suited to the customer's needs and appetite for risk.
The firm knew the risk of the investments, according to the watchdog, but was unprepared to advise customers on the underlying investments. The FCA also reported that one senior employee wrote in an email to the firm's compliance partners that it did "not want to know" what those investments were.
What is more, the British watchdog found that LJFP failed to take reasonable care to ensure the suitability of its advice for the customers who the FCA said should have been able to rely upon the advice given. By failing to do so the firm breached Principle 9 of the FCA's Principles for Businesses.
At the moment, the financial planning firm has paid redress of more than £2.6 million to 41 customers who have lost out because of this failure, according to the FCA. LJFP will be conducting a customer contact exercise in relation to the remaining clients.
LJFP failed to manage its conflicts of interest
In addition, the watchdog discovered that, between January 2013 and November 2017, LJFP failed to ensure it "identified and managed" potential conflicts of interest fairly between itself and its customers, which breached Principle 8 of the FCA's Principles.
During this second period, LJFP recommended Amber Financial Investments Limited as a wrap platform for its clients and that they make investments through Tatton Investment Management, the discretionary fund manager, without disclosing to its customers that it had shareholdings in these companies.
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Mark Steward, executive director of enforcement and market oversight at the FCA, 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."
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