AJ Bell’s head of platform technical Mike Morrison (pictured) is to launch his own investigation into who is really responsible for SIPP failures, following mixed decisions from the industry’s ombudsmen, and conflicting signals from the regulator and other bodies.
Speaking after the SIPPs and Retirement Options conference last week, Morrison said the big message of the conference for him was a lack of clarity around who is responsible for self-invested personal pension (SIPP) failures and complaints.
The failures will cost the industry 13% more in compensation this year – via the Financial Services Compensation Scheme (FSCS) – than in 2014/15. Just over one-fifth of this will be shouldered by life and pensions advisers.
There have been calls for the FSCS life and pensions adviser category to be broadened to include SIPP providers, and this is one of the scenarios that will be put to the industry during the review proposed by the recent Financial Advice Markets Review, released by the Financial Conduct Authority (FCA) earlier this year.
But FSCS CEO Mark Neale argued in a recent interview with Retirement Planner’s sister title Professional Adviser that there are problems with this approach because “buying into a product is often the result of bad advice, meaning this sort of levy wouldn’t address the root of the problem.”
This exacerbates confusion about where responsibility for the failure lies.
In July 2014 the Financial Ombudsman (FOS) ruled against SIPP provider Berkeley Burke, and said that the trustee of the SIPP had a duty to ensure the underlying investment was suitable for the member where there was no authorised adviser.
But last year, in an almost identical case, The Pensions Ombudsman ruled that the same SIPP operator had complied with its obligations and given the investor clear warnings it was not responsible for losses or liabilities that result from investment decisions when the wrapper was opened in 2011.
The first ruling seems to indicate the provider is responsible, the second shifts the blame to the client, Morrison argued.
He added: “The timing of the investment seems to be a factor in the decisions made but I want to go through all the cases on SIPP failures and try to identify a pattern. The industry needs to know who is responsible under what circumstances and exactly what due-diligence a SIPP provider needs to do on underlying investments.”
Morrison explained that the landscape was mixed for advisers too. “Although most advisers help run the underlying investments, in some cases they seem to have divorced the wrapper from these, shifting the responsibility to the client,” he added. “The onus of responsibility in cases like this are another area requiring clarification.”
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