Clydesdale Bank has been ordered to compensate a client for unsuitable investment advice given in 1998, despite arguing the complaint had been made to the Financial Ombudsman Service outside the permitted time limits.
In a decision upheld in March, the ombudsman found the client was unsuitably advised to invest too many of her savings into products it deemed to be riskier than necessary.
The client was 66 years old when she first received advice from the bank, and the ombudsman heard she had run a "small" market stall with her husband until his death the previous year.
Following the death of her husband in 1996 the client retired, passing the stall to relatives, and her representative claimed she had a maximum of £25,000 in savings and received a basic state pension.
In 1997 Clydesdale advised the client to invest £6,000 in the MLC Conservative Portfolio, with a further top-up of £6,000 in 1998, and £5,000 in the MLC UK Equity Fund Unit Trust in 1998.
Whilst the ombudsman was satisfied the Conservative Portfolio was suitably low risk, it found the Equity Fund "posed more of a risk to the client's money than she should have been advised to take".
Despite evidence suggesting investments in the client's name had existed prior to the advice, the ombudsman heard the client's late husband had dealt with such matters and this therefore did not necessarily reflect her understanding of risk.
The ombudsman also found a combination of the client's age at the time of advice, the recent death of her husband and a lack of ongoing income meant she should not have been advised to take "much, if any," risks with her savings.
Ombudsman Tony Moss said: "From what I’ve read, she would have had no means of making up any losses and was likely to need access to at least [some] of this money to support her retirement.
"If her husband had held an investment in her name this does not mean she necessarily had any knowledge about or experience of investments and from what is little is known I doubt she would have been a knowledgeable investor.
"I think she would have been almost entirely reliant on the adviser to assess her needs and circumstances and advise her accordingly."
The ombudsman also found the client had been advised to invest too high a proportion of her savings, £17,000 of £25,000, and questioned the suitability of investing two lots of £6,000 in the same product - which he said did not provide "suitable diversification".
During the initial adjudication process Clydesdale argued the client's complaint had been made outside of the permitted time limits, but an adjudicator at the service disagreed and an ombudsman later found the complaint was within the FOS' jurisdiction.
Clydesdale also argued the client's representatives had been unable to provide evidence of her finances and circumstances at the time of advice and maintained the initial 1997 investment of £6,000 had not left the client overcommitted.