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Zurich is accused of ‘implied advice’

An adviser has slammed Zurich after claiming the group offered implied advice to his clients.

Capital Asset Management managing director Alan Smith says the firm has crossed the product provider line and strayed into giving implied advice.

In a letter dated April 2009, Zurich said it was withdrawing the New Star higher-income, high-yield bond, managed distribution and sterling bond funds to new investors after a period of underperformance.

The funds are now closed to new investors in its Sterling bond and Zurich pension propositions as well as the Sterling Isa/Sterling investment account.

Zurich says in the letter it “strongly suggests” existing investors should discuss remaining invested or switching options with their adviser or call Sterling directly.

Smith says: “The responsibility of the investment should rest with the adviser. I understand the need to offer more information in these times but if the recommendation was taken up it would effectively have crystallised losses made by the funds. What the group has done is overstep their role and undermined mine.”

He admits that it is sensible to keep a watchful eye on the New Star sterling bond fund, but points out that it has seen an 11 per cent rise in the past month, which clients leaving the fund could have missed.

A spokeswoman for Zurich confirms letters were sent to IFAs and their customers invested in the New Star Sterling bond fund.

She says: “In the letter to IFAs, we stated we were closing the fund to new investors and listed their specific customers that this closure affected. We also publish all details of any fund closures on our intermediary website.

“Under the terms and conditions of their plans, and as part of treating customers fairly, we are obliged to tell customers the actions that are being taken on the fund they are invested in and always strongly suggest they speak to their adviser.”


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