A Thinc client who accused her adviser of churning an investment to generate commission has had her complaint upheld by the Financial Ombudsman Service.
Mrs A, who was acting as a trustee of a settlement, complained that an adviser employed by Thinc Group Limited told her in 2005 to encash two Clerical Medical with-profits bonds and re-invest the proceeds in a Skandia Enhanced bond.
The Clerical Medical bond was valued at £1.36m and following application of market value adjustments and surrender penalties there was £1.19m to re-invest, with £1.47m placed in the Skandia bond after an enhancement.
Mr and Mrs A took income drawdown from the Skandia bond from the outset.
A representative of Mrs A said the adviser, who was only employed by Thinc for a short period of time, churned her investments over a number of years to generate commission.
Thinc stopped receiving commission for the Skandia bond when the adviser moved to another firm in September 2006. At his new firm, the adviser continued to offer advice on the Skandia bond in relation to fund switches.
It was only when he recommended the bond should be surrendered and the proceeds re-invested in an offshore bond that concerns were raised by Mrs A.
A spokesman for Thinc Group said it did not have full point of sale documentation because much of it had been destroyed, adding that it could not comment on whether advice had been given to actually surrender the Clerical Medical bond.
The firm also stated it did not believe Mrs A had suffered a loss and felt the trustees were ineligible to complain because the fund value was in excess of £1m.
From the limited information available, a Fos adjudicator said they thought it was likely that Mr and Mrs A had been advised to surrender the Clerical Medical bond, so the complaint should be upheld.
The adjudicator said Thinc Group was only responsible for the advice given between 2005 and September 2006 and asked the intermediary to calculate what would have happened if the money had remained invested with Clerical Medical.
Thinc Group was unable to reinstate or get figures for the Clerical Medical bond and asked Fos to calculate redress using their methods. The Fos’ calculation showed there had been no loss.
But Mrs A’s representative disagreed with the adjudicator and did not accept Thinc’s responsibility ended in 2006, suggesting instead that the loss calculation should run to the current date.
Ombudsman Ross Hammond reviewed the case and ultimately upheld the complaint, ordering Thinc to cough up compensation, despite the fact the adjudicator had initially ruled it did not owe Mrs A.
He said Thinc Group was responsible for the future consequences of the transfer advice. “As Mr and Mrs A were contractually committed to the charges when they invested in the (Skandia bond), I feel they ought to be taken into account. They existed as a result of the adviser’s recommendation.
“The crux of the complaint is not about the general suitability of the (Skandia bond), but rather the charges which were unnecessarily incurred by transferring the investment from the (Clerical Medical bond).”
He ordered Thinc to calculate the enhanced allocation from the Skandia investment - the additional 20 per cent - minus £168,909 deducted from funds when the Clerical Medical bond was surrendered and minus the establishment charge - representing the full 1.8 per cent annually for 10 years.
Mr Hammond said the figure reached by this sum should be paid to Mrs A as compensation.
