The Financial Ombudsman Service has ordered Openwork to pay compensation to a client after she was incorrectly classed as a “speculative investor” by one of the firm’s advisers.
Openwork must compensate the client for any losses resulting from being placed in the wrong fund, plus a flat payment of £250 “for any worry suffered with regard to the fluctuations in the value of her investment funds”.
The dispute arose after the client, Mrs S, a woman in her early thirties, claimed she had not understood the high level of risk inherent in the fund her money had been placed in.
She claimed she actually had a “cautious” attitude to risk, and would not have agreed to put her money in the fund, had Openwork properly explained the risks.
The firm did not uphold her initial complaint, prompting her to go to Fos.
While ombudsman James Harris said Mrs S probably had been told about the risks involved, he said there was “cause for concern”. His main criticism of Openwork was its classification of Mrs S as a speculative investor.
“Although Mrs S’ circumstances suggest she had a capacity for some risk – she was in her early thirties, mortgage free and with a reasonable professional income – I think it ought to have been pretty clear to the adviser that the descriptions of a speculative investor weren’t a natural fit,” read the decision notice.
“For instance, it appears that she’d had only one previous investment, a policy that was invested solely in a managed fund,” stated Mr Harris. “So I’m surprised there wasn’t more comment in the report explaining why it was reasonable to categorise Mrs S as a ‘speculative’ investor.”
Fos told Openwork to pay the client, Mrs S, the difference between the actual value of her assets as a result of being put in the high risk fund, and what it would have been had her money been put in more appropriate passive index funds.
james.fernyhough@ft.com
