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Claims Representation
Recent cases or those I am currently representing are confidential. However, in order to give clients an idea of the sort of issue on which successful complaints can be made, below are some recent cases handled by the UK Financial Ombudsman Service in London. These are all similar to cases that I have represented.
The “we” is the UK Financial Ombudsman Service.
Successful Cases
Case 1: High-income bonds – inexperienced investor – firm’s inappropriate advice
Mr M was 72 and living on a modest pension when he was advised to invest £5,000 in a high-income bond.
The firm’s product literature for the bond warned that investors could lose a small amount of capital. The ‘fact find’ completed by the firm recorded that Mr M was ‘seeking capital growth’ and was prepared to take a medium/high level of risk with his investment. However, Mr M had not signed the ‘fact find’ and there was no record that the adviser had discussed any alternative type of investment with him.
Several years later, alerted by press reports about some of the disadvantages of high-income bonds, Mr M contacted the firm. He discovered that the value of his investment had dropped considerably. Although the level of growth he had been promised was guaranteed, he now realised that the return of his original investment was not. So he complained to the firm.
Complaint Upheld
We noted that Mr M had little experience of stock market investment and had never had any medium/high risk investments before. At the time he was advised to put his money into the bond, his capital was all in a deposit account, apart from £1,000 in premium bonds and £3,200 in a low-risk personal equity plan (PEP) that included some shares.
Although, after investing in the bond, Mr M still had some funds put by for emergencies, nearly 75% of his capital was in equity-based investments.
We upheld this complaint on the grounds that the firm’s advice had been inappropriate and had exposed Mr M to too great a degree of financial risk, in view of his circumstances. We required the firm to give Mr M a refund of the full amount he had invested, together with interest.
Case 2: Unit-linked Endowment Policy – mis-sold as savings vehicle
Miss C’s complaint concerned the firm’s mis-selling of a unit-linked endowment policy, together with life assurance, when, as an 18-year-old student, she had sought advice on a means of saving for the future.
She said she not wanted to take any risks with her financial affairs and that, since she had been single at the time with no dependents, there had been no need for any life cover.
The firm rejected her complaint. It said that the adviser had discussed various different options with Miss C at the time of the sale, and that he had not thought life cover was right for her circumstances. However, he had arranged the life cover for her because she said her parents had told her they thought it was essential.
Complaint Upheld
We upheld Miss C’s complaint on several grounds.
There was no evidence that the adviser had properly determined Miss C’s attitude to investment risk. The products he had sold were inappropriate for her circumstances at the time, and there was no evidence that he had discussed any alternatives with her. In the ‘fact find’ he had incorrectly described the endowment policy as carrying a low risk.
He had also noted that the aim of the investment was ‘for future efficient repayment of mortgage and loans’. This had not been Miss C’s intention at the time of the sale.
We therefore ordered the firm to refund, with interest, the premiums she had paid for both policies.
Case 3: Inappropriate Advice – investment of funds needed for school fees
Mrs J complained about the investment advice the firm gave her in connection with money she planned to use to pay her children’s school fees. She thought the product that the firm had recommended represented too high a risk.
Since she had made it clear that she would need to withdraw some of the money fairly soon, she also thought the firm should not have advised her to invest all of it.
The firm rejected her complaint. It said the investment was consistent with Mrs J’s attitude to risk and that it had not been wrong to invest all of the money. It claimed that Mrs J already had sufficient money in a savings account to cover the first year’s school fees, so would not have needed to make an early withdrawal.
Complaint Upheld
The purpose of the investment was to provide funds to meet a known and imminent cost, so we did not think a high-risk strategy was appropriate. Moreover, a high-risk strategy did not match Mrs J’s attitude to risk. And there was no evidence that she had sufficient funds set aside to cover the first year’s school fees, so the firm should not have advised her to invest all the money.
We decided the appropriate remedy was for the firm to pay Mrs J an amount equivalent to a full refund of her initial investment, less the amounts she had subsequently withdrawn.
Case 4: Inappropriate Risk Level – Inexperienced Investor
Mrs E, an elderly lady, complained that she had been inappropriately advised to transfer her entire savings from a building society account into an offshore high- yield fund, and to take an income from the new investment.
Although the investment generated an income, the amount of capital depreciated significantly. Mrs E said that she was not in a position to take any risk with her investment and had not been warned that the capital could depreciate.
The firm suggested that Mrs E had been advised of the risk she was undertaking and there was a note to this effect on the ‘fact-find’.
Complaint Upheld
Mrs E was not an experienced investor and had previously taken no risk with her money. The product literature provided no warnings about possible capital depreciation. Moreover, the level of income that the adviser suggested was highly likely to cause the amount of capital to fall. We also noted that, before she made this investment, the adviser had told Mrs E her building society funds were at risk of falling in value, as a result of inflation.
We decided that the appropriate redress was to place Mrs E back in the position she had been in before transferring her funds out of the building society. We therefore required the firm to close the new investment and to place back in
Mrs E’s building society account the same amount that, acting on its advice, she had transferred out. No account was taken of the higher income Mrs E had enjoyed from the offshore fund.
Case 5: Mortgage Endowment Policy – mis-sold and ‘churned’
Mr and Mrs O complained to the firm that its representative should not have advised them to surrender the two mortgage endowment policies they had taken out with the firm some 10 years earlier.
When the firm looked at the complaint, it concluded that the policies had been mis-sold, since the couple had not wanted to take any risk with their investment. The firm offered them redress in accordance with guidance provided by the regulator. However, Mr and Mrs O refused this offer. They felt that the firm had ignored the main point of their complaint – that they had been wrongly advised to surrender the two policies. The firm reviewed the case and concluded that the policies had been ‘churned’, (in other words that the adviser had persuaded the couple to surrender the policies simply to get more commission for himself by selling them new ones).
The firm then withdrew its previous offer and sent the couple a revised offer of redress, calculated according to its standard formula for cases of ‘churning’. At this point, Mr and Mrs O referred their case to us. They thought that the firm should offer them compensation for the original mis- selling of their policies, as well as for the subsequent events.
Complaint Upheld
We agreed with the firm that the policies had been ‘churned’, and that a repayment mortgage would have been a more suitable option for Mr and Mrs O. But we did not think the firm should have withdrawn its original offer of compensation. We asked it to reinstate that offer and to offer the couple additional compensation for the churning of both policies.