The children of a deceased couple have been ordered to return more than £40,000 compensation that was paid to their parents by the government’s safety net scheme.
Roland and Margaret Parkinson, were missold investments by their financial adviser whose business went bust in 2012 after he was fined for breaching of regulations and later found to have committed fraud. He was jailed in 2017.
Brian Parkinson, 68, and his two siblings have now been told they have to return the money given to Roland and Margaret by the Financial Services Compensation Scheme (FSCS) in 2012.
The dispute centres around whether or not the family have been paid twice after Quilter International, the firm that administers Roland and Margaret’s investments, paid the family £120,000 last year, which put them in the position they would have been had the fraudulent transactions never taken place.
The family claim their parents were also missold investments by the adviser before the fraudulent transactions took place, and that the FSCS payment covers them for losses incurred on these. This is the point that is in dispute.
Advertisement
Brian, an engineer from Waterlooville in Hampshire, said he wants to “finalise my parent’s estate and move on.”
What happened
Roland and Margaret decided to reorder their savings in 2004 because he was becoming increasingly frail and needed help. The retired chemist, who was 82 at the time, wanted to make sure he could provide security and comfort in their later years. Margaret was 80.
Their adviser, Martin Rigney from Topps Rogers Financial Management, had been a family friend since the 1970s and suggested several different products, some high risk and unregulated, offered by Royal Skandia Life Assurance Limited (later to become Old Mutual, now part of Quilter). The total invested was about £106,000. Roland’s health later deteriorated and he moved into a care home in 2006. and died in December that year. He had suffered strokes and was registered blind. Margaret, a retired laboratory technician , cashed in about £8,000 of their investment to settle Roland’s care bill.
In 2006 Rigney had invested all the rest of the Parkinsons’ money — £99,511 — in a Polish property fund.
In 2012 an investigation by the regulator the Financial Services Authority (now the Financial Conduct Authority) found that Rigney had advised dozens of clients, including the Parkinsons, to invest millions of pounds in high-risk, unregulated investments.
Advertisement
He was fined £117,330 and banned from offering advice. His business, based in Hope in Derbyshire, failed. The Parkinsons only discovered something was wrong after reading a press report about the adviser.
The failure of Topps Rogers Financial Management meant that investors who had lost money could approach the FSCS for redress. The FSCS is a pot of money paid for by financial advisers and used to compensate victims of misselling when a firm managing your money fails. Ultimately, the costs are borne by all investors through higher advice charges.
Margaret received £40,592 from the FSCS as an interim payment in November 2012 because it thought the couple had been missold the Polish fund. A final settlement could only be reached when the remaining value of the underlying investments could be worked out.
What was unknown to the family and the FSCS at this time however was that Rigney had forged the couple’s signature when he invested in the Polish property fund, earning himself a huge commission.
The FSCS claim was based on the assumption that the Polish investment was made with the Parkinsons’ consent. The fund fell sharply and withdrawals were suspended after the 2008 financial crash. A police investigation uncovered the forgery and, in 2017, Rigney was jailed for seven years.
Advertisement
Margaret died in 2016 and her three children became executors of her estate. They asked the firm now administering their parents’ money, Quilter, to pay them what their investments would have been worth before they were fraudulently moved to the Polish fund.
Three years later, in February 2020, Quilter paid them £120,140. This included £11,668 interest and £5,000 compensation for poor customer service and delays.
Combined with the £40,592 from the FSCS, the family had a total of £160,732.
But the FSCS has now said the family must give back the £40,592 it paid because they were over-compensated.
The family argue that the original FSCS claim was for misselling the Polish fund in 2006, when in fact their parents were the victim of a crime. They say that they should have been compensated for the misselling of the original high-risk, unregulated funds in 2004. They say they should have been sold funds to provide a stable income in retirement to cover care home fees. Some of these 2004 investments lost about £50,000 — outstripping the FSCS payment.
Advertisement
If Roland and Margaret had invested their initial £106,000 in a low-risk fund in 2004 — one that had about 35 per cent in shares and the rest in bonds and other cash-like assets — they would now have about £208,500, according to the independent firm Candid Financial Advice. This is almost £50,000 more than the total compensation paid by the FSCS and Quilter.
Rigney declined to comment.
The FSCS said it stands by its decision to reclaim the money. It said it had informed the Parkinsons, before making a payment, that they would need to return the money if funds were returned to the family. It said it will work with them to arrange a repayment plan.
Quilter said it had resolved Mr Parkinson’s complaint in full last year.
The timeline
2004 Roland and Margaret Parkinson are advised by Martin Rigney to invest £106,000 in high- risk, unregulated funds.
Advertisement
2006 Roland dies in December. Rigney forges his signature to transfer about £99,000 to an unregulated Polish fund.
February 2012 Rigney is fined and banned from offering advice. His firm fails.
June 2012 Misselling claim is lodged with the Financial Services Compensation Scheme. £40,500 is awarded as an interim payment while the investments are unwound.
November 2012 Police launch criminal investigation into Rigney. Family discovers the Polish investment was fraudulent.
2016 Margaret dies. Her three children are executors of her estate.
2017 Rigney found guilty of forgery and sentenced to seven years.
2020 Quilter pays the family £120,140 to reflect what the investment would have been worth if the forgery never happened.
FSCS demands the family refund the 2012 interim payment, but the family argue that the interim payment covered the original misselling in 2004, before the
2006 fraudulent transaction.
How much does a financial adviser cost? Times Money Mentor