An ombudsman has told Compass Wealth Management Consultants Limited it wrongly advised a client to cash in a bond.
The Financial Ombudsman Service told Compass to pay up compensation despite the intermediary arguing it only gave the client, referred to as Mrs B, information - and did not recommend she surrender her bond.
Mrs B’s husband died in May 2014 and at the time she had a capital investment bond which was held jointly with her spouse and another smaller investment in an Isa held in her sole name.
Shortly after Mr B’s death she went to see her adviser and as a result of that meeting she signed an encashment form which Compass sent to the provider.
The bond was encashed on 1 August 2014 with a value of just over £127,000, which was then paid into her bank account.
The adviser said he met with her and completed a full fact find however this wasn’t produced for the ombudsman.
The adviser said Mrs B was ill prepared for the meetings and he had to spend a considerable amount of time resolving what he refers to as ‘peripheral’ issues as she wasn’t well versed in financial matters.
The adviser said: “We fully discussed her needs for future income and eventually I made the appropriate suggestions.”
He said he expected her to post him a cheque with the proceeds of the encashed investment so “we could proceed”.
But according to the ombudsman the adviser provided no explanation of why cashing in the bond satisfied her needs and said nothing about what he recommended she should do with the money he expected her to send him.
In the circumstances, on the evidence given, the ombudsman concluded there was no clear need for the bond to be cashed in.
The adviser argued that while accepted he met with the widow on more than one occasion and fully explained all the options, going through analytics, costing and performance, charges and tax treatment it was Mrs B’s decision to cash in the bond.
However in a final decision ombudsman Philip Gibbons said he thought it was very unlikely that the adviser simply provided Mrs B with information without making any recommendation about what she should do.
Mr Gibbons said: “I’m satisfied that, on a balance of probabilities, Mrs B was advised to cash in her bond and this is something she wouldn’t otherwise have done.
“I have seen nothing that suggests she had a need to do this (cash in the bond). In the circumstances I’m not satisfied the advice to cash in the bond was suitable."
As Mrs B reinvested part of the money she received from the bond more than a year ago the ombudsman ruled it would not be appropriate to try and put her back in the position she would have been in if the bond hadn’t been encashed.