Money Marketing revealed that Barclays advised some unsophisticated clients who were approaching or in retirement to transfer long-term savings into the single specialist fund. The value of the fund fell by 45 per cent in the 12 months to March 2009.
Barclays says it erroneously categorised the fund as balanced, rather than adventurous, between July and November 2007, after it introduced a new risk-rating framework. It says: “This error was identified in November 2007 and we proactively contacted all affected clients to sort it out, providing them with several options moving forward.”
Barclays insists it calculated the amount each investment had underperformed against a benchmark equivalent for a balanced fund and offered to restore investors to the position they would have been in if they had been invested in a balanced fund.
But one investor, Nick Low, who asked for his capital not to be put at risk, was advised to put £200,000 into the fund in August 2007 on the basis that it was a balanced fund. Low complained to Barclays in November 2008 as his investment had fallen by 17 per cent to the end of October.
In January 2009, Barclays rejected the complaint. It acknowledges in its letter to Low that his risk profile is balanced but goes on to conclude there is “no evidence that you were misled about the expected level of risk attached to this investment”.
Another investor, John Fraser, was advised by Barclays to invest £175,000 into the Aviva balanced global income fund in April 2008, after Barclays had reclassified the fund as adventurous.
The 77-year-old says that he asked for an investment with minimum risk as he wanted security and income for his retirement. In November 2008, Fraser received an unsolicited report that included a change to his attitude to risk from balanced to adventurous. But Fra- ser insists that he did not authorise Barclays to make the change and he did not sign and return the report. He is now facing losses of up to half his capital.
Both investors have now referred their complaints to the Financial Ombudsman Service.
Park House Financial Services partner Richard Davis says he has been contacted by more than 30 investors facing huge losses as a result of Barclays’ advice.
Barclays says it is looking into the two cases but declines to comment further at this stage.