Upheld: Pension transfer advice complaint against Profile Financial Solutions Limited
Financial Ombudsman decision DRN-4489348 of 2023-12-09T00:00:00+00:00. Pension transfer advice complaint against Profile Financial Solutions Limited. Outcome: Upheld.
Decision detail
| Reference | DRN-4489348 |
|---|---|
| Decision date | 2023-12-09T00:00:00+00:00 |
| Firm | Profile Financial Solutions Limited |
| Product | Pension |
| Claim type | Pension transfer advice |
| Outcome | Upheld |
| Remedy | Profile must compare the actual value of the SIPP investment with the notional value had it remained in the ReAssure Pension (using the ReAssure Pension Portfolio benchmark or, if unavailable, the FTSE UK Private Investors Income Total Return Index). If the notional value is greater, compensation is payable. Compensation should be paid into the pension plan to increase its value, allowing for charges and tax relief. If payment into the pension is not possible, compensation should be paid directly to Mr W, reduced to allow for notional income tax at his marginal rate at selected retirement age (or 75% of compensation if tax-free lump sum available). Compensation is capped at £190,000 plus interest, with recommendation to pay any balance exceeding this limit. |
Summary
Mr W complained that Profile gave unsuitable advice in 2017 to switch his ReAssure Stakeholder Pension to an Aegon SIPP, claiming his circumstances were not properly assessed and the investments were unsuitable. Profile argued it was instructed to provide focused pension review advice and that the recommendation reduced costs and provided additional benefits. The ombudsman upheld the complaint, finding that Profile failed to conduct a proper Know-Your-Client exercise to assess Mr W's financial circumstances, a fundamental regulatory responsibility. Although the SIPP offered annual cost savings of 0.27%, the initial £471 advice fee represented 5% of the pension's value and would take approximately 20 years to recover, making the overall recommendation more expensive in real terms. The stated objectives of flexibility of benefits and ongoing advice did not justify the additional expense given Mr W was 30 years from retirement and the original pension already offered drawdown options. Profile was ordered to pay compensation calculated by comparing the actual SIPP value with the notional value had the original pension been retained.
The Ombudsman's reasoning
The ombudsman found that Profile failed to conduct a fundamental Know-Your-Client exercise to assess Mr W's financial circumstances, which was a regulatory responsibility. Although product costs were reduced by 0.27% annually, the initial £471 advice fee (5% of pension value) would take approximately 20 years to recover through these savings, making the overall recommendation more expensive in real terms. The flexibility of benefits and ongoing advice objectives, while stated by Mr W, did not justify the additional expense, particularly given Mr W was 30 years from retirement and the ReAssure Pension already offered drawdown options. The SIPP portfolio lacked reliable performance data for a significant portion, undermining the suitability of the recommendation.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| Profile Financial Solutions Limited, all decisions | 22 | 46% |
| Pension transfer advice, all decisions | 7,542 | 54% |
| Pension, all decisions | 15,579 | 47% |
Source
Read the original decision on the Financial Ombudsman Service website