One of Brewin Dolphin’s clients has complained about advice to buy a medium-risk bond, even though it didn’t alter the overall make-up of their portfolio.
The client complained to the Financial Ombudsman Service, which found in favour of Brewin Dolphin.
Referred to as Mr C, the client was concerned about advice received in 2013 to invest around £70,000 in the Enquest 5.5 per cent Bond 2022.
He said the bond was supposed to be included in the low risk part of the portfolio, but in fact it was a high risk investment, something he suggested would unbalance the overall portfolio so it was no longer in line with his attitude to risk.
But ombudsman Alessandro Pulzone said there was nothing untoward about Brewin Dolphin’s recommendation.
“It is an accepted feature of a diversified portfolio that there will be a mixture of assets which are characterised by different risks,” stated his decision.
“The balance of these different assets should be suitable for the consumer. But the individual assets themselves may well represent a higher risk than the consumer is willing to take.
“So, investing in a medium risk bond, even if Mr C had a cautious attitude to risk, would be acceptable, as long as it didn’t alter the balance of the portfolio to the extent that it was no longer suitable for Mr C.”
Mr C - whose investments were split between 30 per cent to 40 per cent in bonds and the rest in equities - asked for the purchase of the Enquest bond to be considered only in relation to the other bonds he already had in his portfolio.
But Mr Pulzone said Brewin Dolphin advised Mr C the bond “would form a suitable investment for [his] portfolio” and didn’t recommend it as suitable in relation to a specific part of his portfolio.
The bond itself was medium to long-term, with a duration of nine years, but was in line with the other bonds already in Mr C’s portfolio, which had maturity dates from 2020 to 2041.
The coupon of 5.5 per cent led Mr Pulzone to conclude that it was in line with what an investor would expect from a medium-risk bond.
