View more on these topics

Coutts to compensate Sipp investor over poor advice 

Money-Coins-Pound-Currency-Close-up-700x450.jpgThe Financial Ombudsman Service has ordered wealth manager Coutts & Company to pay compensation for advising a client to put £160,000 of their self-invested personal pension into an RBS Navigator investment bond.

The upheld decision concerns Mr W who complains he did not fully understand the product he invested in and was unhappy with only getting his money back with no return.

In January 2012, Mr W was advised to invest £160,000 of his Sipp into the Navigator investment. In January this year the investment closed with £160,000.

A FOS adjudicator found Mr W had not fully understood the product and that if it had been properly explained he would not have taken it out.

The adjudicator set out how the firm should calculate redress in line with one of FOS’s benchmarks.

However, Coutts disagreed with the adjudicator’s view and said the Navigator was appropriate for Mr W.

It argued Mr W had wanted to de-risk, was keen on capital protection, the Navigator provided the potential for better returns than a deposit account and Mr W was happy to invest for at least five years.

Coutts added the product was straightforward and only part of the available money was put into the Navigator suggesting Mr W understood what he was doing.

Mr W argued these explanations were not available to him at the outset, he was provided with only a factsheet at the time and still finds it difficult to understand the information upon which he was expected to invest.

Additionally, at no time was a formal risk assessment carried out before the recommendation and the business provided misleading and inaccurate information in various responses to his complaints, Mr W added.

In upholding the complaint FOS explains the business’s adviser had two key responsibilities towards Mr W where it fell short: an adequate explanation of what he was investing in and ensuring it was suitable for his circumstances.

FOS explains structured investments designed to at least return the capital invested are not without risk and the possibility of receiving a no or a very small return can be a danger.

This because of the effect of inflation on the purchasing power of the investor’s money.

Specifically on the Navigator as a product and how much Mr W understood it FOS says: “Whilst the general principles of the Navigator may be straightforward for the business to understand, I don’t think it was for Mr W. He maintains that he has difficulty understanding the various graphs, charts and terminology even now.

“I don’t entirely agree that the Navigator simply provided a chance for growth, with no risk to capital. I think this is an over simplification. The Navigator is a structured investment and one that Mr W hadn’t historically invested in, despite the business’s incorrect record that he frequently invested in structured products.”

To compensate Mr W fairly FOS explains Coutts should compare the performance of Mr W’s investment with the benchmark and pay the difference between the fair value and the actual value of the investment.

If the actual value is greater than the fair value then no compensation is payable.

Several reasons given for choosing this method of compensation are Mr W wanted capital growth with a small risk to his capital; the average rate for the fixed rate bonds would be a fair measure for someone who wanted to achieve a reasonable return without risk to his capital and Mr W has not yet used his pension plan to purchase an annuity.


No change to FOS funding model next year

The Financial Ombudsman Service does not plan on making any changes to the way it is funded in the next financial year. The FOS published a consultation today about its proposed plans and budget for the 2018/19 financial year. The consultation says the organisation is aware it will need a funding model that accounts for […]

FCA building FCA fees

FCA: FOS does not need more rules about interpreting regulation

The FCA has said that the Financial Ombudsman Service does not need more guidance on how it should match the regulator’s rules with the complaints adjudicator’s judgments. While the FCA regulates firms according to its handbook, FOS decides on complaints based on a ‘fair and reasonable’ test, that is, whether the claim would be successful […]


FOS and Pensions Ombudsman agree new complaints handling deal

The Financial Ombudsman Service and The Pensions Ombudsman have finally signed a deal to clarify how complaints are dealt with after more than two years in the making. FOS and TPO first said they were holding discussions over a new ‘memorandum of understanding’ in September 2015 after confusion over where their respective jurisdictions ended. This […]


How much are advisers charging for pension transfers?

Defined benefit pension transfer charges are being put under the microscope again as the regulator turns over more potential conflicts of interest. With the British Steel Pension Scheme the latest to dominate headlines and the FCA ready to interrogate further as it extends its review to include all firms authorised to give pension transfer advice, […]


News and expert analysis straight to your inbox

Sign up


There are 5 comments at the moment, we would love to hear your opinion too.

  1. Cake & eat it.

  2. Worth reading the decision notice DRN2314977 as this is a case of the investor taking LESS risk, I.e. o capital risk than he later claimed to be willing to take. The suitability report would have proven useless to defend the case as the FOS decision is based on supposition. The only defence for an adviser with th FOS is I my view recording the actual meeting. Even then, they are just as likely to decide something to lose you said or did was unfair and it’s all your fault.

  3. Why ever would graphs and charts be necessary to explain how an investment as (relatively) simple as a structured deposit works?

  4. I’m pretty certain that if “Mr W” had gotten back more than the original amount invested then he’d have absolutely no problem with “fully understanding the product”.

  5. If they were saying he had previously had structured investments and this was incorrect, makes you wonder what else was missed or skipped over.

Leave a comment