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FOS Confirms ‘High Risk’ Clients Incorrectly Assessed by BlackStar Wealth Management

Last year a claim against BlackStar Wealth Management Ltd was upheld by the Financial Ombudsman Service (FOS), a Government backed body set up to resolve complaints between financial businesses and their customers.

The case concerned Mr I, who complained that BlackStar’s investment advice led him to suffer financial losses. The FOS finding has come into sharp focus with the recent valuation by the Financial Services Compensation Scheme (FSCS) of the investment concerned, Store First, at nil.

Mr I had been advised to transfer his existing pensions into a SIPP for the purposes of investing in Store First, described by the Ombudsman in his decision as, “an unregulated investment in commercial property providing self storage units”. Mr I was of relatively modest means and had little investment experience. Following an investigation, the FOS Ombudsman upheld that it was inappropriate for BlackStar to recommend Store First as it was an unregulated, high risk investment.

Given the discrepancy between the client’s financial position and Attitude to Risk (ATR), the Ombudsman agreed that BlackStar should have taken steps to ensure that the client understood the ATR questions, which in this case had been completed by an introducer. Mr I had signed to agree that his ATR score meant he was ‘extremely high risk’. The Ombudsman did not believe BlackStar should ever have accepted this based on Mr I’s proximity to retirement age, health conditions and his moderate net worth.


FOS Decision over BlackStar Wealth Management

The Ombudsman found that BlackStar had failed to meet its regulatory obligation to know its client and that, “a competent adviser, having fully reviewed Mr I’s circumstances, would have concluded that he was in no position to enter into the proposed transfer and subsequent commercial property investment.”

In the decision, that can be found here, the Ombudsman made it clear that BlackStar had incorrectly assessed Mr I’s Attitude to Risk and based on this risk assessment, had incorrectly advised on the investment in Store First.

The Ombudsman went on to say that since Mr I was paying BlackStar for its advice, he was entitled to rely on that advice and its suitability.  The Ombudsman stated, “I am not persuaded that BlackStar could suitably advise any client… on the basis of documents supplied to it by an unregulated introducer, one telephone call with the client and no further enquiry about the client’s circumstances”.

The complaint was up-held and BlackStar were ordered to pay Mr I compensation.


TLW Solicitor’s View

TLW have a number of clients with very similar experiences to Mr I.  Even if you have been led to believe that you are a high-risk investor, this does not necessarily mean that you have been correctly assessed.

The rules that regulated advisers must follow are strict. The Financial Conduct Authority (FCA) sets out these rules which are designed to protect customers. Amongst other regulatory obligations, advisers must ensure that any advice they give is suitable.

To enable this to happen the adviser must obtain all the necessary information regarding their client’s: –

  • knowledge and experience in the investment field relevant to the specific type of designated investment or service;
  • financial situation; and
  • investment objectives.

Sarah Spruce, Head of TLW’s Professional Negligence team, said:

“Sometimes these guidelines are not correctly followed and therefore attitude to risk can be incorrectly assessed.  If your financial adviser has assessed you to be a high-risk investor incorrectly it could mean that they have invested your pension monies inappropriately, potentially leading to a loss in pension funds.

The FSCS have confirmed that they are currently valuing Store First investments at nil. Store First may not have been an appropriate investment for anyone seeking to protect and maintain their pension funds.

Our specialist lawyers are currently dealing with over forty complaints against Blackstar Wealth Management relating to unsuitable pension and investment advice.”


Mis-Sold SIPP investment claims

If you have transferred your pension into a SIPP and lost money on your investments, it may be that those investments were not appropriate for you or your SIPP.  Initially, the advice you received to transfer your original funds may have been from your financial adviser (who may now be longer in business). Alternatively, you may have a claim against your SIPP provider for their lack of due diligence on the investment. Time limits apply to cases like this and so anyone wishing to bring a claim should do so without delay.

If you think that you, a friend or loved one may have lost out due to SIPP provider negligence, then please get in touch with one of the specialist financial mis-selling lawyers here at TLW Solicitors for a free, no obligation discussion.

You can either ring us on 0800 169 5925, email info@tlwsolicitors.co.uk or complete the call back form below.

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