DISCIPLINARY – Firm fined over annuity advice.

Hereward Philips, now part of Smith & Williamson, has been fined £5,000 and ordered to pay £11,500 in costs after being found responsible for failing to ensure a client fully understood the nature of the risks involved in a £40,000 life annuity investment, writes Gavin Hinks. The firm was also found to have failed to satisfy itself of the suitability of the client for the investment, which was unprotected. The case arose after Ruth Waterhouse approached the firm in 1992 seeking advice on investment to pay for nursing care for her husband, Vincent, 79, who had suffered a stroke. He died in March 1993 and it was then Mrs Waterhouse learned the investment was unprotected – and could not be reimbursed after her husband’s death. She maintained she believed it was protected which would have enabled her to receive back the balance between the purchase price of the annuity and the payments they had already received. She finally brought a complaint in 1995 and a disciplinary tribunal of the English ICA reached a decision in September, but only made the finding public at the end of last year. However Mrs Waterhouse died in March 1999, six months before a conclusion was reached on her complaint. The tribunal found she had taken advice from an ‘unqualified’ employee who had no ‘significant’ training or experience in investment business advice. In issuing its reprimand the tribunal found that neither an annuity form nor a letter from the accountants to their client ‘confirmed’ the investment was unprotected. It said the company, which denied the complaint, had failed to warn Mrs Waterhouse of the risk. Helen Parsons, daughter of the couple, said: ‘I think the ICA was absolutely correct. The accountant did not care enough about my mother.’ Smith and Williamson declined to comment.

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