Tenet warns about post-Brexit complaints

Tenet warns about post-Brexit complaints

Tenet has urged advisers to document any changes in their clients' attitude to risk ahead of Brexit, to avoid retrospective claims with the Financial Ombudsman Service if portfolios suffer as a result of market volatility.

Caroline Bradley, group risk and regulatory director at Tenet Group, said some clients will inevitably change their attitude towards financial risk in the run-up to Brexit and may wish to alter their investment strategies accordingly. 

When that happens advisers have to ensure they document any changes in attitude to risk to back up any advice they might give, she said. 

Tenet is encouraging its advisers to remind clients of the importance of long-term investments and their capacity for loss in times of market uncertainty, in preparation for the UK's departure from the European Union later this month. 

But Ms Bradley said going a step further and documenting all conversations would help manage any post-Brexit claims where clients are unhappy with how portfolios reacted in the short-term due to potential market volatility.  

"If documented properly, a client cannot claim they did not ask to be sold out to cash or that they didn't appreciate what was going on at the time," she said.

She added: "Advisers are not investment professionals, they cannot predict market movement, they are financial advisers. 

"The advice process should be the same in any type of market regardless of uncertainty, be it Brexit or the US trade war, and advisers should never be making a gut reaction to the market."

The Fos does not deal with complaints about market performance but it does consider claims about bad advice.

In an update in 2010, when volatile market conditions had led to an increase in the number of investment complaints in relation to property funds, it made clear: "We do not deal with complaints that clearly relate solely to poor investment performance.

"However it is not uncommon for a complaint prompted by poor performance to reveal underlying issues that we are able to look into, including inappropriate advice and failure by a business to disclose relevant information about any risks relating to an investment."

Rick Eling, investment director at Intrinsic, Quilter's advice network, agreed advisers will be best prepared for Brexit if they have communicated to the client what their risk profile should look like in different markets. 

He said: "Portfolios must be positioned to respond to a range of possible outcomes, no serious manager will be betting on any one outcome.

"A client may complain that a manager should have stopped a financial loss if it was obvious markets would dip, but it’s not the job of a proper manager to insulate those who want returns from market risks.

"If you want to get a return, you only get that with a certain element of risk."

Mr Eling added: "The clients most at risk are those whose adviser claims they can predict the future, saying ‘I’ll park you in cash and magically say when to get back into shares’."