HSBC has been told to compensate a client for failing to invest his self-invested personal pension in line with his risk profile.
The client, known as Mr H, had been a discretionary fund management client of HSBC since 2002 and received regular reviews from their advisers.
HSBC managed about 30 per cent of Mr H’s family wealth, was tasked with completing a risk assessment each year and was being paid between £20,000 and £30,000 a year for managing Mr H’s money.
In February 2008, after speaking with his adviser, the risk level on his Sipp was reduced from an aggressive to an absolute return strategy.
Mr H told the Financial Ombudsman Service he believed this was a temporary measure as the adviser thought investment markets were about to drop and HSBC stated the new strategy was medium risk.
However the adviser who made this change left in 2009 as she was no longer able to make such short market decisions due to changes at the bank.
Had the adviser remained with HSBC, the client argued the change back to a higher risk approach would have taken place at an appropriate time.
Over the next few years Mr H had a number of reviews with a number of different advisers – some over the telephone - at HSBC.
At all times it was agreed that Mr H was an adventurous investor and on 20 September 2013 his objectives were recorded as moving two other pension plans into his Sipp.
He was identified as having a very high attitude to investment risk and the report identified that the existing portfolio provided a lower level of risk than Mr H wanted to take.
But, the advice was to remain in the existing funds so the risk profile of his Sipp stayed the same up to 14 August 2014 when he was switched back to an aggressive strategy.
Mr H initially complained to HSBC, which didn’t uphold the complaint and a Fos adjudicator agreed that the banking giant had not done anything wrong.
But in a final decision ombudsman Roy Milne agreed the change in strategy in 2008 should have been a temporary measure.
HSBC calculated the loss created by the failure to increase risk in the portfolio in 2013 instead of in 2014 was £163,806.
HSBC agreed to pay the full amount of the loss plus £500 for the distress and inconvenience caused; Mr H’s costs of taking financial advice and any inheritance tax liability when that arises.
But the client argued he should have been switched back to a more high risk approach as early as 2010.
However Mr Milne ruled the advice to switch to the absolute fund in February 2008 was suitable and a switch back to the aggressive fund should have been recommended in June 2013.
He backed HSBC’s calculation of the loss until the funds were switched in August 2014.
HSBC must also meet the inheritance tax liability when it falls due.
emma.hughes@ft.com
