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FOS Victory against BlackStar for TLW Client

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Following on from our review of the challenges facing BlackStar Wealth Management the specialist financial mis-selling team at TLW Solicitors have successfully acted for a client who recently had his claim upheld by the Financial Ombudsman Service (FOS), a Government backed body set up to resolve complaints between financial businesses and their customers.

Facing a worrying uncertain financial future after receiving unsuitable pension advice from BlackStar, Mr C came to TLW Solicitors for help. TLW have now obtained a decision from an Ombudsman, the highest level of FOS, for Mr C.

Financial advice given to Mr C

In 2014 Mr C was introduced to BlackStar for financial advice regarding his retirement. Mr C had four pensions, including a ‘final salary’ defined benefits pension with a guaranteed income of £8000 per year on retirement. This made up half of his total pension pot of £180,000. The three remaining pensions had no guaranteed income benefits.

BlackStar carried out a fact-find to establish Mr C’s attitude to risk (medium) and his anticipated retirement income (£15,000 annually). BlackStar advised that he transfer the defined benefits pension scheme, as well as the other pensions, into a Self Invested Personal Pension (SIPP).

They advised he invest £30,000 each into Colonial Capital Corporate Bonds and Dolphin Capital GmbH, with the balance invested in a range of collective funds.

The SIPP was opened in March 2015 and an annual review in June 2016 confirmed that ‘medium risk’ was still appropriate.  However, Mr C was unhappy with the fund choices and the advice given to him, leading him to make a complaint. BlackStar did not uphold the complaint and the case was referred to the FOS.

FOS’ view on BlackStar’s Advice

The FOS adjudicator concluded that the advice given to Mr C was unsuitable and that Mr C would not have been able to understand the complex unregulated investments recommended to him. The unregulated investments were not mainstream investments and were unlikely to be suitable for most consumers.

When looking at the pension transfer from Mr C’s final salary scheme, the FOS adjudicator noted that the return required from the new investments, to match the guaranteed £8,000 per annum from his old pension, was over 11% and the likelihood of achieving this was “very limited”.

BlackStar conceded that to achieve a return of more than 6%, would require significant investment risk “on a consistent basis”, something that clearly did not match Mr C’s risk profile.

The adjudicator added that too much of Mr C’s money had been placed in these high-risk investments. In fact, one of the investment companies, Colonial Capital, went into administration in 2017 and Mr C’s investment was lost.

Ombudsman’s final ruling

BlackStar disputed the adjudicator’s decision, arguing that Mr C had been given specific risk warnings about the investments. They also said that the original pension forecasts showed that Mr C would not be able to achieve his desired £15,000 annual income, whereas the new pension projection showed that he would exceed this amount.

Ombudsman, Keith Taylor concluded that the FOS adjudicator’s reasoning was correct, and that Mr C had been given unsuitable advice by BlackStar.

He found that Mr C did not appear to have a “significant capacity for loss” – this is how Mr C could have coped with his investments losing money, for example in an economic downturn.  Given his mortgage and limited savings, and heavy reliance on his pension pot for his retirement income, the risk score of ‘medium’ was critical.

Investing such a large part of his pension fund in high risk bonds was completely wrong for Mr C. BlackStar should have taken responsibility for advising Mr C against such investments.

TLW Solicitors’ response

Transferring out of a defined benefits pension scheme is something that should not be considered lightly. A good financial adviser will look at investment strategies that work for each particular client. BlackStar failed Mr C by allowing him to invest in unregulated, high risk funds.

BlackStar must now pay redress to Mr C for the money he lost by transferring out of the final salary pension scheme and the other pensions. This aims to put Mr C back in the financial position he would have been in, had he not taken BlackStar’s advice and covers the loss in pension value, Mr C’s distress, any fees paid to the SIPP provider, the cost of transferring to a more suitable pension investment, plus any backdated interest.

Peter McKenna of TLW Solicitors said:

“We are delighted that at all stages of the FOS process they have agreed that Mr C was given unsuitable advice by Blackstar and now Mr C will be properly compensated for the losses suffered as a result of that unsuitable advice.”

Mis-Sold SIPP investment claims

If you have transferred your pension into a SIPP and lost money, it may be that those investments were not appropriate for you. Time limits apply 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 money on pensions or investments due to negligent advice, 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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