The Financial Ombudsman Service (FOS) has backed an IFA who advised his client on high risk investments.  The decision supports lead ombudsman Caroline Mitchell’s claim that the FOS supports advisers “more often than not,” in reaching its decisions (see Brunel News December 2015).

The adviser, referred to by the FOS as ‘Mr R’ worked for financial advice firm Bob Little & Co.  He was advising his client ‘Mr L’ on investment products designed to give a high return.  Mr L used some of the proceeds of remortgaging his house and additional sums to invest in a series of products intended to earn 12{0a6a65c996ed4169444354e707b897cdb00dbefc1d0429e8febb9bf11027ba53} a year.

The FOS report says that Mr L met his adviser in October 2010 “to discuss his retirement planning.  He wanted to know if he could afford to retire a few months later in March 2011. Mr R told him that if he invested more money into his portfolio (taking the total investment up to £180,000) he would be able to withdraw £1,500 to £2,000 per month.  Mr L’s investments didn’t perform as well as he expected. In June 2012, the poor performance of the investments forced him to take an equity release mortgage on his UK property.”

Mr L also complained to the FOS that Mr R had completed the attitude to risk paperwork and had wrongly recorded him as an ‘experienced investor’.

The ombudsman, Laura Colman, found in favour of the adviser.  “I was satisfied that Mr L wanted to take a high risk with his money, and that Mr R had given him suitable advice.  I didn’t think Mr R had misled Mr L about the returns he could expect from his investments. Mr L was a very experienced investor, and over the years he would have seen significant fluctuations in the value of his portfolio. In 2010, I thought he would have known it was impossible to achieve returns of 13{0a6a65c996ed4169444354e707b897cdb00dbefc1d0429e8febb9bf11027ba53} without taking significant risk.” She added that it was “very difficult for me to ignore Mr L’s signature” on the attitude to risk paperwork.

 “Advisers, will be reassured that the ombudsman is willing to back them when they give suitable advice,” said James Burgoyne, Director – Claims & Technical, Brunel Professional Risks.  “The adviser in this case had clearly done everything right and was able to effectively evidence his actions to the ombudsman.  It shows just how valuable it is for advisers to have solid procedures and comprehensive records.”

The case has been reported by FT Adviser.  The ombudsman’s decision is available here.