06Sep

Medway, Kent-based advisory firm Apollo Pension & Investment Advisers has been ordered by the Financial Ombudsman Service (FOS) to compensate the widow of a man who received pension advice from the firm. The man, referred to as Mr T, was terminally ill at the time and was recommended to switch his self-invested personal pension (SIPP) to another SIPP. The FOS has ruled that Apollo’s advice was inappropriate.

The advice was given in 2012, five years after he was diagnosed with an untreatable brain condition. At the time of the advice, his health was said to have been rapidly deteriorating.

Mr T was advised to switch his SIPP, worth £315,000, to another SIPP, on the basis that this would be the only way he could invest in an unregulated scheme called Green Oil Plantations Ltd (GOP). £150,000, almost half his pension fund, was invested in this oil scheme.

Mr T made a complaint about this advice in 2015, and died before the firm completed its investigations. Apollo eventually rejected the complaint, saying that it had not provided advice on where the funds should be invested, and that this had in fact been provided by another firm.

However, in finding in Mr T’s favour, ombudsman Keith Taylor pointed out that Apollo still had responsibilities to conduct thorough fact-finding and to ensure the investment was suitable. He also pointed out that the ‘other firm’ referred to in the firm’s defence was in fact also owned by Mr T’s Apollo adviser.

Mr Taylor’s judgement said:

“The adviser employed by Apollo recommended the SIPP and was also the agent for GOP. I think the adviser must have known that the investment was to be made in GOP.”

He also noted that the previous SIPP monies had all been invested in one fund, and therefore queried whether this type of high-risk investment was appropriate for Mr T, particularly when his personal circumstances were considered.

Mr Taylor added:

“His attitude to risk was recorded as highly speculative and volatile, but I’m not satisfied this was accurate, especially given how Mr T’s illness was progressing and that he wanted to provide for his wife and daughters after his death.”

The SIPP has now been transferred to another provider by his widow. Apollo is now required to compare the performance of the SIPP with that of the FTSE index, and to make good any losses. The firm must also pay Mrs T £500 as compensation for distress and inconvenience.

The case highlights two important issues, firstly that terminally ill clients need to be treated with the utmost care. Given the short time they have to live, it is highly questionable whether any recommendation for a long-term investment would be suitable, and whether any high-risk investment would also be suitable. Secondly, before advising any customer to invest in a high-risk area, such as the GOP scheme, advisers must carry out a comprehensive assessment of a client’s attitude to risk and capacity for loss, and make recommendations that are compatible with both their risk profile and their capacity for loss. Attitude to risk is fairly well understood as being the level of risk a client wishes to take with their investment, however the concept of capacity for loss is less well understood. This refers to the level of loss a client can sustain without experiencing financial difficulty.

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.