The Financial Ombudsman Service confirms that Intelligent Money Ltd failed to protect its customers

In a recent final decision, an Ombudsman has confirmed that Intelligent Money didn’t do enough to protect its customers when accepting money into their Self Invested Personal Pensions (‘SIPP’s) and permitting routine high-risk investments.

Faced with more than 80 similar complaints, Intelligent Money has entered into administration but customers still have the opportunity to claim compensation.

What happened?

Mr S was contacted by Active Wealth UK Limited which advised him to move his £233,000 pension monies into a SIPP. In November 2015, Active Wealth instructed Intelligent Money to transfer £150,000 of the pension to a Novia Financial Plc platform for investment in Greyfriars Asset Management LLP (“Greyfriars”) Portfolio 6 (“P6”). This portfolio consisted of mini-bonds including overseas investments in real estate, car parks, renewable energy and holiday resorts.

Active Wealth advised Mr S that there was no risk in investing his pension funds with Intelligent Money Ltd in this way, however, Mr S didn’t know that the investments were high-risk and unsuitable for him.

A year later, in 2016, the Financial Conduct Authority (‘FCA’) instructed Greyfriars to stop accepting any new money into the P6 portfolio on a permanent basis, and after a lengthy investigation, the FCA issued a Decision Notice in May 2023 confirming that, at the relevant time, Active Wealth was routinely pushing large volumes of similar clients into SIPPs with Intelligent Money, into the same high-risk investments, amongst other things[1].

Ultimately, the £150,000 investment made by Mr S into Greyfriars P6 is illiquid. In our experience of these situations, we think it’s likely that the money invested has, or will be, lost. Mr S has also lost out on the returns he could have achieved from alternative suitable investments since 2015.

Mr S argued that, had Intelligent Money conducted adequate due diligence in relation to Active Wealth and the Greyfriars P6 investments, he wouldn’t have incurred the losses that he has.

On 29 February 2024, the Financial Ombudsman Service (“FOS”) issued a final decision[2] upholding Mr S’s complaint against Intelligent Money.

What did the FOS consider?

The primary consideration for the FOS was whether Intelligent Money acted with reasonable care, due diligence, and fairness in accepting Mr S’ application to invest with Greyfriars in P6.

That assessment involved whether Intelligent Money conducted appropriate due diligence in relation to Active Wealth, Greyfriars and P6 before accepting the application.

The FOS looked at a number of matters when assessing the complaint, including:

• Intelligent Money was obliged to adhere to the FCA’s Conduct of Business Sourcebook (‘COBS’) rules, including the ‘client’s best interest rule’[3] which says that “A firm must act honestly, fairly and professionally in accordance with the best interests of its client”.
• Various regulatory publications by the FCA and its predecessors, the Financial Services Authority, provided important publications to SIPP operators, like Intelligent Money. Those publication highlighted, amongst other things:
  • SIPP operator’s obligations;
  • significant failings in conducting due diligence; and
  • the expected industry practises to ensure fair treatment of customers.
• Mr S’s complaint concerned the due diligence that Intelligent Money should have performed before accepting his application. The FOS therefore considered that the specifics of Mr S’s case, including Intelligent Money’s role and actions, were crucial and looked into these in detail.
• Ultimately, as with all complaints, the FOS made its decision based on what it believed to be fair and reasonable in all the circumstances.

What did the FOS decide?

The FOS found that Intelligent Money’s due diligence in relation to Active Wealth was insufficient; it failed to recognise the high risks associated with investments referred by Active Wealth.

Intelligent Money’s due diligence on P6 and Greyfriars was also found to be inadequate, exposing Mr S to significant financial risk.

The FOS concluded that it was fair and reasonable that Intelligent Money should have declined business from Active Wealth and ceased permitting investments with Greyfriars and P6 before accepting Mr S’ application.

Given Intelligent Money’s failure to conduct adequate due diligence, the FOS told Intelligent Money to compensate Mr S for his losses, by putting him in the position he would have been in if his pension monies hadn’t been transferred to Intelligent Money and invested in P6.

Will Intelligent Money pay Mr S compensation?

In short, no. As well as Mr S’s complaints, the FOS reportedly had more than 80 other complaints against Intelligent Money which, collectively, would have had severe financial consequences for Intelligent Money. In the face of those consequences, Intelligent Money went into administration on 28 May 2024.

Intelligent Money struck a deal to transfer their client accounts and assets to another company, Quai Investment Services, but their liabilities to Mr S and other complainants were not transferred.

What does this mean for Mr S and others with complaints against Intelligent Money? All firms regulated by the FCA pay a levy to the Financial Services Compensation Scheme (‘FSCS’) and those levies are used to pay compensation to customers of failed businesses. Effectively, this means that the businesses in the wider financial services industry will pick up the tab.

The FSCS is now accepting claims in relation to Intelligent Money, but it will probably take some time before any compensation payments are made in relation to successful claims. This is because the FSCS need to investigate Intelligent Money and be satisfied that it cannot meet its liabilities beforehand.

What does all this mean for Intelligent Money customers?

It’s encouraging to see the FOS doing the right thing and holding Intelligent Money responsible for its lack of care. However, this is yet another example of a firm avoiding its liabilities and leaving the wider industry to foot the bill for compensation paid by the FSCS.

This situation is bad news for Mr S and others in his position because, whilst the FOS can (and did in Mr S’s case) make an enforceable award of up to £160,000, which might cover the majority of losses incurred, he and other Intelligent Money customers will now be limited to the maximum award of £85,000 from the FSCS, if their claims are successful. Many will be left severely out of pocket and may wish to take legal advice in relation to other potential claims through which the excess losses might be recovered.

The impact of letting customers down goes way beyond financial loss, however. The news that their hard-earned savings are illiquid, and potentially lost, can be devastating. That feeling will be particularly acute for those at, or close to, retirement age.

Experiences like Mr S and other Intelligent Money customers have had often lead to a loss of confidence and trust, detrimental health outcomes and even a breakdown of relationships with family and friends. These outcomes are as important to avoid as the financial detriment, if not more so. We hope that this final decision is another stark reminder for SIPP operators that they must do better to protect their clients.

Speak to a specialist

If you have concerns about your investments, or financial advice that you received, one of our specialist financial services litigation solicitors will be happy to offer a free initial consultation.

[1] Decision Notice 2023: Darren Atony Renyolds

[2] (DRN-4653321)

[3] COBS 2.1.1R