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Financial advice or non-advised? The root of True Potential’s 8% offer problem

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The Financial Ombudsman rules in favour of Mr G, who was not treated in a ‘fair or reasonable’ way by his financial adviser. However, the question of whether True Potential’s direct marketing offer is ambiguous remains.

True Potential has been in the news again recently after pension investor Mr G complained about unsuitable financial advice. The Financial Ombudsman Service (FOS) investigated Mr G’s pension mis-selling complaint in its role as an independent adjudicator of financial disputes.

Mr G had set up his existing personal pension with a financial adviser’s help in 2018, at a time when the adviser was working privately. The adviser then joined True Potential, a North East-based wealth management company, in 2021, and persuaded him to move his pensions to a True Potential fund. The new fund turned out to be more expensive and less suitable than his previous pension, leading Mr G to believe it had been mis-sold.

As part of its onboarding process, True Potential sends out a marketing offer to existing clients of newly hired financial advisers. The offer, in its eyes, is sent on a ‘non-advised’ basis. In other words, it would be up to anyone thinking of taking up the offer to obtain their own independent financial advice and decide if switching to the True Potential fund is the most suitable option. In return, True Potential pays its advisers 8% of the fund value switched by their clients.

Taking Mr G’s situation into account, he already had a longstanding relationship with a financial adviser and that person was now working for True Potential. They had two meetings and exchanged text messages after he received the marketing offer – did that constitute financial advice? Mr G thought ‘yes’, True Potential argued ‘no’.

When FOS looked at the case, the investigator agreed with Mr G that the adviser had recommended the pension switch and concluded that Mr G had not been treated in a ‘fair or reasonable’ way. True Potential was ordered to compensate Mr G and pay for the distress and inconvenience he suffered.

We also recently highlighted the case of Mr C, who brought a claim to the Financial Ombudsman Service after receiving a similar marketing offer that led to him moving his pension fund to True Potential.

Mr C’s existing financial adviser had switched jobs, just like Mr G’s. Mr C and his adviser spoke about the marketing offer and, as a result, Mr C was persuaded to move his pension. The new pension fund turned out to be riskier and performed badly compared to the fund Mr C had previously invested in.

FOS concluded that Mr C’s financial adviser had provided ‘financial advice’ but had not followed the proper procedure and should have also prepared a suitability report. Had he done so, the decision to transfer might not have been made. As the adviser’s principal True Potential was liable for Mr C’s losses and was ordered to pay compensation.

Citywire’s podcast, The Advice Show, discussed this very issue. The presenters highlighted that there has been a mixture of decisions from FOS, some in favour of the pension clients, others in favour of True Potential. True Potential is keen to distance itself from any contact its financial advisers have with clients and says that the direct marketing offer clearly states it is a non-advised financial offer.

A counter-argument exists: when a financial adviser starts working for True Potential (as a self-employed adviser), there is an 8% offer payable when any of their existing clients transfer funds to True Potential – which could be seen as a considerable incentive to encourage their existing clients to move their funds. Given the adviser and client already have an established relationship based on previous pension/investment advice given, the client could be under the impression that they will receive the same service going forward.

Sarah Spruce, Legal Director at TLW Solicitors, says:

“What FOS has made clear is that establishing the amount of contact between the adviser and client at this stage is crucial. The financial offer is sent out in a direct marketing campaign to a list of an adviser’s clients. The offer contains information about the fund switch, and there is an online process for the client to complete. But did the adviser and client have meetings or telephone contact during this time? Were they in the same room at the time the online transfer application was made? Did the adviser have login access to the client’s account? Was it made clear that the process was non-advised? These are all questions FOS will ask during their investigation and it remains to be seen how True Potential will respond to the issues surrounding its direct marketing offer model.”

Pension mis-selling happens when investors are encouraged to transfer or invest in a pension that is not suitable for them. It may be that fees were not properly explained, or that an unrealistic rate of return was promised.

We understand that for many investors, their pension fund has been accumulated through a lifetime of working and saving, and with the cost-of-living crisis ongoing, few can afford to lose money through unsuitable financial advice.

If you have lost money through pension mis-selling, please get in touch. We will examine the sales process and consider all potential options to recover your losses. Our experienced team will work hard to recover your lost money and seek compensation for the upset and inconvenience caused. We work on a ‘no win, no fee’ basis.

If you are concerned that you or a loved one were not given the right advice about a pension investment, please call us on 0800 169 5925 or use our online form and our team will contact you for an initial, no-obligation consultation.

It is important to get advice as soon as possible as strict time limits can apply.

Minimum case values apply.

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