The Financial Ombudsman Service has upheld a complaint against Philip J Milton & Company after ruling that advice given in relation to a £50,000 investment portfolio was unsuitable.
A couple complained to the FOS after investing in May 2007 on a medium risk basis with the aim of providing an income of £2,000 per year.
The investments performed poorly and at the end of 2010 the couple transferred their portfolio to another firm.
The decision, published last week, rejected the couple’s claim that they were cautious, rather than medium risk, investors. But it found the portfolio was unsuitable as it contained excessive exposure to higher risk elements such as smaller companies, and insufficient exposure to lower risk elements.
The FOS said the couple should be compensated to put them back in the position they would have been had they not been given unsuitable advice.
It ruled Philip J Milton & Company should compare the performance of their investment with the return of the FTSE Apcims income index, adding 8 per cent interest for each year.
Philip J Milton & Company managing director Philip Milton says the compensation is “in the low thousands”.
He says: “The clients tried to portray themselves as unsophisticated but the FOS dismissed that and agreed with our risk rating.
“If the clients had not pulled out of the investments early they would have performed well by now.
“The FOS has selected an index arbitrarily and the addition of 8 per cent interest means consumers are able to profit rather than being put back into the position they would have been.”
Yellowtail Financial Planning managing director Dennis Hall says: “Risk is subjective and advisers must keep extremely good records to prove advice was appropriate. The addition of 8 per cent interest seems excessive given the low base rate.”