The Financial Ombudsman Service has backed an adviser over a client who argued that if he had been an experienced property investor he would not have sought financial advice.
A client known as Mr L complained that an adviser from Bob Little and Co gave him poor advice from 2003 onwards, and particularly in October 2010.
Mr L said in 2003 he wanted to remortgage his UK property and borrow £15,000 for home improvements.
According to Mr L, the adviser, referred to by the Fos as Mr R, persuaded him to borrow as much as he could and invest the extra money (some £31,500) in various different products.
Mr L claimed the adviser told him he would earn 12 per cent a year on his investments, but only pay 5 or 6 per cent a year in mortgage interest. Over the next few years, Mr L invested more money and the subsequent investments were all on Mr R’s advice.
Mr L said he believed he would earn 12 per cent a year on all of the investments and in October 2010, met with Mr R to discuss his retirement planning.
He wanted to know if he could afford to retire a few months later in March 2011 and claimed 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 a month.
Mr L said he believed withdrawals at that level would allow him to maintain the “status quo”, consistently returning 10 to 13 per cent a year.
However Mr L’s investments did not perform as well as he expected and in June 2012, the poor performance forced him to take an equity release mortgage on his property.
But so far as the advice given after January 2006 was concerned, ombudsman Laura Colman said she did not think Mr R or Bob Little and Co had done anything wrong and questioned claims made by Mr L that he had been wrongly classified and misled about the returns he could expect.
She expressed satisfaction 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 per cent without taking significant risk. Overall, I thought Mr R had made clear that he was giving advice about high risk investments, and that Mr L had understood that returns were not guaranteed.”
The client argued although he signed the “attitude to risk” paperwork, it was filled in by the adviser, under his advice and direction.
The client argued the adviser was wrong to consider him an “experienced investor” and stated if he really had been an experienced investor, he would not have needed help from a financial adviser.
Ms Colman added that even very experienced investment professionals will sometimes seek advice from others.
“I still think it highly unlikely that Mr R would have told Mr L in 2010 or 2011 that Mr L’s investments would consistently return 10 per cent to 13 per cent a year. Even if Mr R had said that, given Mr L’s investment experience I don’t think Mr L would have believed him.”
emma.hughes@ft.com
