Rathbones has been told to compensate a former financial adviser over his investments.
The former financial adviser, referred to as Mr B, complained Rathbone Investment Management mismanaged his USD investment portfolio, leading to its underperformance and a financial loss in terms of returns, not capital.
Mr B and his wife complained to the Financial Ombudsman Service that Rathbones’s discretionary fund management (DFM) service had not provided enough growth compared to a comparator, the Fundsmith fund.
He also complained the USD portfolio had a restriction that it should only be invested in US stocks, which he claimed Rathbone breached.
Ombudsman Roy Kuku said low growth was not proof of mismanagement.
Buit he upheld the point about the breached restriction on US stocks only and proposed a resolution to put Mr B as close to the position he would probably now be in if his USD portfolio had been invested in US stocks only.
The relevant benchmark for this would be the S&P 500 USD Total Return index.
Mr Kuku has asked Rathbone to work this out and compensate Mr B.
He said if the amount produced by the calculation of fair compensation exceeded £150,000, Rathbone Investment Management should pay Mr B the balance plus any interest.
Mr B invested £160,000 in a USD fund with Rathbones, and his wife did the same.
He complained about the performance of this fund and the performance of a GDP portfolio also managed through the service but Rathbones described the performance as "satisfactory".
Mr B said: "I do believe that the DFM model was, theoretically, right for us, but the execution by Rathbones has proved pretty disastrous and, in turn, has soured the DFM experience for us."
He also said the bottom line of his complaint about Rathbone's performance was the growth achieved never reflected anything like what was realistically possible in the market, or anything like Rathbone’s declared definition of its aims for the couple's risk profile.
A spokesperson for Rathbones said: "We strive to do the best for every client. On the rare occasion that we do not meet a client's expectations, we have an independent complaints process and ultimately if a client decides to refer the case to the ombudsman, we will respect the decision of the ombudsman."
rosie.murray-west@ft.com
