Skipton Financial Services has been ordered to compensate a pensioner after offering "unsuitable" investment advice on two separate occasions.
The Financial Ombudsman Service published a final decision after a man – named as Mr L - complained about the advice he received from Skipton in 2007 and 2010.
The gripes relates to Mr L investing £25,000 into the Standard Life Distribution Bond in 2007 as well as being advised to encash his Prudential Bond and invest around £44,000 into a Cofunds Isa and Cofunds Unit Trust/OEIC both invested in the Henderson Multi Manager Income and Growth Fund and the Thames River Capital Distribution fund during 2010.
When Mr L complained to the Fos, its investigators upheld his complaint.
Skipton must now compensate Mr L by comparing the performance of Mr L’s investments with that of the benchmark shown by Fos and then pay the difference between the fair value and the actual value of the investments. If the actual value is greater than the fair value, then no compensation is payable.
But it must also pay interest and hand over £150 for the for “worry and distress” Skipton’s actions caused him.
The grievance began in 2007, when Mr L requested investment advice from Skipton. The documents completed at the time showed that Mr L, who was 67 years old, held a number of savings and bank accounts with around £20,000 in total. He also held two life assurance bonds, one with Axa and one with Prudential. These were both taken out in 1999 following advice from another business and totaled around £68,000 in investment value.
He had no other outstanding liabilities and received a yearly income of around £12,000 from pension benefits and investment income.
At the time of this advice most of Mr L’s cash was held in very low risk holdings.
After a number of recommendations, Mr L decided to invest £25,000 each into the Standard Life Bond, Legal and General Portfolio Distribution Bond, and Clerical Medical Distribution Bond.
But in 2010 Mr L returned to Skipton for some further advice because he was unhappy with the performance of the Standard Life Bond.
Now, he only held around £4,000 in easily accessible funds, while his life assurance bond with Prudential was valued at around £44,000 and the Standard Life Bond, which formed part of his complaint, was valued at around £20,000. He also held around £43,000 in Isas, both cash and stocks and shares.
The other changes were that his income had reduced to just under £9,000 a year.
This time Mr L was recommended to encash his Prudential Bond and invest the total of around £44,000 into a Cofunds Isa and Cofunds Unit Trust/OEIC, both invested in the Henderson Multi Manager Income and Growth Fund and the Thames River Capital Distribution fund.
The Fos later deemed this move as unsuitable due to its increased risk for Mr L.
Commenting on the decision, Ayshea Khan, an ombudsman at the Fos, wrote: "The complaint was assessed by one of our investigators who was of the view it should be upheld.
"He felt both investments in 2007 and 2010 were unsuitable for Mr L. He felt the advice in 2007 was unsuitable because the makeup of the Standard Life Bond almost replicated that of the Axa bond which Mr L was unhappy with.
"He also felt the Cofunds portfolio represented more risk than was suitable for Mr L. And he didn’t think Mr L should have been advised to encash his Prudential bond because he felt Mr L was unhappy with the Standard Life Bond rather than the Prudential Bond yet the adviser still recommended he encash it.
"He therefore felt Mr L would have kept the Prudential bond in place until the point at which he encashed both bonds and moved his investments way from Skipton in their entirety."
