A pensions transfer and opt out adviser, Portal Financial Services LLP, had given advice to several clients introduced by a third party advisory firm which was the AR (Cherish) of another firm whose permissions did not extend to advice on pension transfers. The introductions were for the purpose of Portal advising the clients on transferring out of existing occupational or personal pension schemes into a SIPP. Once Portal had given that advice, Cherish was to provide further advice on the investments to be held within the SIPP. Cherish had assured Portal that it did not recommend or promote UCIS, but in fact then advised all but one of the consumer “interested parties” to invest a portion of their portfolio in UCIS, which they did and suffered loss as a result. Cherish and its principal firm then became insolvent. The interested parties complained to FOS about the advice they had received from Portal. FOS found against Portal, saying that;
- it could not divorce giving advice on suitability of the transfer from considering the suitability of the underlying investments or rely on Cherish to do so;
- it therefore failed in its primary duty to properly advise on the suitability of the transfers; and
- although Cherish may also have separately caused some of the losses, Portal should be responsible nonetheless for 100% of the loss
Portal applied for judicial review of the decision, saying that the 2 Ombudsmen who decided the case acted irrationally in concluding that alerts the then FCA had circulated were “good business practice” and/or that there was an error of law. One of the alerts had specifically said that where an adviser recommends a SIPP knowing that existing pension funds would be released into it, then the suitability of the underlying investment must form part of the advice given to the consumer. The Ombudsmen had stressed that they were not saying that Portal was wholly responsible simply because Cherish and its principal had gone into liquidation. Rather, they worked on the basis that Portal gave unsuitable advice – it could have prevented the transfers, but instead facilitated them. It had never entered into a relationship such as the one with Cherish before and clearly did not get meaningful assurances from Cherish as to the nature of the advice that it would give.
The court found the decisions of the Ombudsmen were lawful, within their powers and not open to arguable challenge by way of judicial review. The applications for judicial review were dismissed.