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So when I saw a long analysis piece in Money Marketing last week about IFA John Duerden, of Garrison Investment Management, taking on the nasty old Financial Ombudsman Service and seemingly winning, my interest was natu- rally piqued. Duerden successfully appealed to the High Court against an FOS decision that he should pay compensation to a couple over advice on two investments totalling about £110,000. The FOS wanted him to pay compensation on the basis of its formula, whereby redress is based on standard base rates plus 1 per cent. Duerden argued that the couple were high-risk investors “who knew what they were getting themselves into”. Given their risk profile, it was “unreasonable for the FOS to assume when calculating redress that the couple would not have invested their money in equities, which suffered a similar loss to NDF products during the same period.” The judge concluded that there was “no logical connection between the redress and the error in this case”. This, according to Duerden is a vindication of his stance. He further insists that he was not at fault over the sale. Now, any analysis of what happened will inevitably suffer from lack of space, even in a newspaper such as Money Marketing. And, as many of the facts in this case remain confidential, there will inevitably be some gaps in what can and can’t be told. So let us look at what we can say. The first thing is that both NDF3 and NDF5, the funds in question, were not ordinary investments but, I understand, three-year precipice bonds. This means they were based on the usual mishmash of stockmarket proxies that had to perform in the right manner in order for investors to get their money back. In the case of NDF3, the bond had a 25 per cent “safety net”. If the various indices to which this bond was linked fell beyond that, losses were accelerated on a two-for-one basis. NDF5 worked in a similar manner, except that its safety net was just 15 per cent. The retired couple, it was alleged in court, had previously invested in a “high-risk” equity portfolio. But there is a world of difference between a poorly performing share, which you can buy or sell at any time and reinvest the proceeds, or even a unit trust that can be switched from one fund or another, and an ultra short-term investment that must be held until maturity – with any losses then crystallised on a two-for-one basis. Another thing we can say is that the couple had total assets of about £280,000. Between 2000 and January 2001, they were persuaded by Duerden, or they persuaded him, to invest 40 per cent of this money into two precipice bonds. Now, I have spoken to a number of well respected financial advisers and they tell me that they are aghast at this proportion of total assets going into a single type of investment. One told me: “I would never have recommended something like this.” Another said: “The only time I have ever known it to happen is when people invest on an execution-only basis.” A third added: “If someone came to me, I would do my best to dissuade them, even if they were desperate to do this. If need be, I would go for the nuclear option and tell them I did not want to act on their behalf in respect of this investment.” Duerden, as we know, remains convinced that his advice was not flawed. Presumably, his fact-find, of which we know nothing, contains plenty of evidence that this was precisely the kind of investment that the couple needed, in preference to anything marginally less exotic? Or that the couple instructed him against his better judgement and clear advice? Or maybe the fact-find does not prove that at all? The one thing that is not clear from the reports I have read of the judicial proceedings is that, contrary to all the claims of victory by Duerden and his lawyer Gareth Fatchett, the High Court actually found in favour of the FOS on a number of points, including a major one. Its key decision was that while NDF3 may have been a justifiable recommendation, given the client’s probable risk tolerance, NDF5 was not. The only point at which the judge demurred was in his assessment over the scale of compensation that must be offered, not that no redress should be paid at all. As we know, the FOS is now going back to the drawing board to recalculate the amount of redress that the couple should receive. I understand that this will be done quickly, for reasons related to the couple’s personal needs. Meanwhile, I find myself wondering how it is that advice like this can be feted as a triumph for the industry’s Davids against an overweening and arrogant Goliath. All it does in my eyes is confirm the extent to which some advisers have yet to travel.