ISAsMar 31 2017

Isa transfer advice costs IFA

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Isa transfer advice costs IFA

An adviser must compensate a client who was told to transfer her individual savings account (Isa), surrender an investment bond and reinvest the proceeds.

The client, referred to as Ms W, complained she was wrongly advised by Acuity Professional Advisers Ltd and suffered a financial loss because of the adviser’s recommendations. 

But Acuity argued there was sufficient documentary evidence and records to show the client understood what she was doing. 

In a final decision, ombudsman Philip Gibbons said Ms W may well have understood what she was doing but she relied on the advice she was given by Acuity when deciding what to do.

Mr Gibbons said an Acuity adviser completed a financial planning review for Ms W in September 2014, just 14 months after they recommended an Isa and investment bond. 

Ms W’s aims and objectives were identified as “investing from savings and reviewing her Isa to consider its ongoing suitability and reduce costs if possible.”

The adviser recommended she transfer her existing Isa and also invest a further £50,000. 

There was no mention in the review about surrendering her investment bond and while Acuity suggested the transfer to a new Isa was suitable because it reflected her new risk profile there was no evidence there was a change in risk profile. 

The risk profile completed by the adviser showed she was a moderate risk investor yet the recommendation he then made was to invest in a moderately cautious fund.

Mr Gibbons said: “There is no explanation why he recommended a more cautious investment than her risk profile suggested - I have seen no evidence her risk profile had changed from moderate risk. 

“The funds she was already invested in were suitable for somebody who was prepared to take a moderate risk. And I have seen no evidence these were unsuitable for her. 

“So I don’t think there was any reason to transfer her Isa because it wasn’t in line with her risk profile.”

So I don’t think there was any reason to transfer her Isa because it wasn’t in line with her risk profile.Philip Gibbons

The review suggested Ms W was also interested in lower charges for her investments and the recommended investment did mean she was paying a slightly lower overall percentage charge than for her existing Isa. 

But Mr Gibbons said the actual saving, based on the amount transferred was only around £70 a year. 

He said: “I think its unlikely Ms W would consider such a small saving was a good reason to transfer her Isa. But in addition Acuity also charged a fee of 3 per cent on the amount transferred to the new Isa, which amounted to about £1,380. 

“So I don’t think there was any real saving from transferring. 

“Taking account of the very small saving on ongoing charges, the fee of 3 per cent, the fact her existing Isa was suitable for her risk profile and was performing well, I don’t think the transfer was in her interests and I don’t think the recommendation to do this was suitable. 

Ms M also surrendered an investment bond, for about £102,000, and reinvested £95,000 of this in the investment recommended by the adviser. 

Mr Gibbons said: “I think both the recommendation to transfer the Isa and surrender the bond and reinvest the proceeds were unsuitable.”

To compensate for the Isa advice, Acuity was told to subtract the surrender value of the recommended investment from the value of the original Isa on the date the recommended investment was surrendered if there had been no transfer in 2014, and add 8 per cent to that amount. 

For the investment bond Acuity was told to take the value of the original investment bond, on the date the recommended investment was surrendered, if there had been no surrender in 2014 and subtract the proportion of the recommended investment surrender value that was from the investment bond which amounts to 91.65 per cent and the amount that was not reinvested from the investment bond into the recommended investment in 2014.

Acuity then has to add interest at 8 per cent a year from the date of surrender of the recommended investment to settlement. 

Acuity was also told to pay Ms W £150 for the trouble and upset caused by its unsuitable advice. 

emma.hughes@ft.com