The Financial Ombudsman Service (FOS) has instructed an adviser to refund £4,250 to a client, after finding that the adviser had failed to be transparent over what he was entitled to expect in return for paying an ongoing service charge.

The central concern of Mr W’s initial complaint was that his adviser failed to make him aware of the existence of ongoing service charges when advice was given to switch his pension to another provider.

The FOS rejected this assertion, saying that the adviser had provided sufficiently clear information regarding the existence of ongoing charges. However, the independent complaints adjudication body still found in favour of Mr W, saying that his adviser failed to fully explain the level of ongoing service that was available.

One of the key reasons that ombudsman Ivor Graham reached this decision was that the adviser had used the potentially confusing term ‘external investment charge’, instead of the normal terminology of ‘ongoing advice charge’.

The adviser said that the services available to Mr W, should he have chosen to use them, included:

  • An unlimited number of face-to-face conversations with his adviser
  • Unlimited telephone conversations with the adviser
  • Use of tools made available by the pension provider, including a pension review service, an at retirement tool and a risk profiler

However, Mr W argued that he did not use these services as he was confused as to what was available to him.

In his published decision, Mr Graham said:

“I uphold this complaint and I direct [ADVISER NAME] to recompense Mr W.

“I am satisfied that [ADVISER NAME] gave Mr W information about both the initial and ongoing charges. Furthermore, I have seen nothing to support the view that the advice was unsuitable.

“However, the investigator identified that there was some confusion on the level of service which would be provided as a result of Mr W paying the ongoing charges. It seems Mr W didn’t make use of these services and that may have been as a result of the confusion in the terminology used e.g. ‘external investment charge’ rather than ongoing advice charge.

“So, while I don’t believe Mr W wasn’t told about the charges I don’t think he was necessarily aware of what these were for.”

This case illustrates the importance of being totally transparent with clients about exactly what the adviser will provide in return for any fee paid by a client.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article