Guinness Mahon Trust Corporation Limited (GMTC), a known Self-Invested Personal Pension (SIPP) provider, took a tumble, sliding into administration due to a deluge of complaints around insufficient investment due diligence. The brunt of these investments were non-standard and high-risk, triggering significant financial losses for their customers.
Here’s how it unfolded:
- GMTC’s Fall into Administration: In February 2020, after the dust had settled on a series of damaging complaints, GMTC fell into administration. The heart of the complaints lay in accusations that GMTC had failed to do its homework on risky investments, leading to substantial financial losses for clients.
- FSCS Steps In: In the aftermath, the Financial Services Compensation Scheme (FSCS), a Government-backed lifeline for those stung by a financial firm’s failure, deemed GMTC to be in default. This greenlit a path for wronged customers to claim compensation.
- The Unregulated Advisors Debacle: A significant portion of GMTC’s clientele were counselled by unregulated and underqualified advisors to transfer their pensions into the GMTC SIPP. However, once transferred, these funds found themselves placed in precarious and unsuitable investments. The repercussions? Major financial losses, with certain investments now illiquid and untradeable.
- GMTC’s Due Diligence Flaws: Doubts have been raised over GMTC’s apparent lack of robust due diligence checks on non-standard investments. The question is, did customers receive enough information about the risks involved? Especially considering GMTC was aware that advice was coming from less-than-qualified advisors.
FSCS Compensation on the Horizon
The silver lining here is that despite GMTC’s failings, aggrieved investors may still be able to claw back compensation for their losses. The FSCS allows for compensation claims up to the value of £85,000 when an investment provider hits the wall and is declared in default.
The financial industry publication, FT Adviser, recently disclosed that the FSCS has already paid out a hefty £22.5 million across over 700 GMTC claims, with approximately 250 claims still in the balance. It’s estimated that there were around 4000 Guinness Mahon SIPPs in total at the time the firm collapsed.