| a
selection of some of the investment-related complaints
we have dealt with recently
28/14
single-premium payment into unit-linked personal pension
– customer wrongly advised
In
1999, when he was 63 years old, Mr D was advised to make
a single payment of £8,000 into a unit-linked personal
pension. He said he had wanted to put this money into
a savings account. However the firm’s representative
had persuaded him that he would be better off paying it
into a personal pension instead.
Two
years later, when Mr D retired, he got less from the personal
pension plan than he would have done if he had left his
money in a savings account. The firm refused to uphold
his complaint so he came to us.
complaint
upheld
Initially, the firm refused to accept our view that Mr
D had been wrongly advised. The case therefore went to
the final stage in our complaints-handling process and
received an ombudsman’s final decision.
The
ombudsman agreed with our case-handler’s initial
view that the pension plan had been mis-sold. The ‘fact
find’ that the representative had completed at the
time of the sale recorded that Mr D had always planned
to retire at the age of 65. This meant that his investment
had a maximum of two years to grow. Two years is very
little time for a pension plan to grow sufficiently even
to recoup the initial charges. Moreover, because the pension
was unit-linked, it was subject to stock market fluctuations,
so we felt it was suitable only as a medium- to long-term
investment. Two years was not medium - to long-term.
Rather
than asking the firm simply to refund Mr D’s initial
investment plus interest, we asked it to amend the annuity.
We told it to assume that the value of Mr D’s pension
fund on the day he retired was equal to the amount of
his initial investment, plus interest. It should then
base his annuity on that amended amount. We also asked
the firm to refund, with interest, the difference between
the annuity payments Mr D had already received to date
and those he should have received, based on the amended
amount.
................................
28/15
surrender value quoted over telephone – whether this
was misleading
Mrs
T needed to cash-in her unit-linked bond earlier than
she had originally expected. She telephoned the firm to
find out how much she would get. But when she surrendered
the policy some weeks later, she received £940 less
than she said the firm had led her to expect. She asked
it to pay her £940 to bring the payment up to the
‘correct’ amount. When the firm refused, she
referred the complaint to us.
complaint
upheld
In support of its case, the firm sent us a taped recording
of Mrs T’s telephone call to its customer service
department. During the call, the representative said that
the policy’s surrender value would be ‘around’
£7,000. However, he stressed that this value
could not be guaranteed and would be subject to any market
fluctuations in the period before she surrendered the
policy.
We
considered that the representative’s statement about
the amount Mrs T would receive was somewhat misleading,
even though he had made her aware that the figure he quoted
was not guaranteed. When Mrs T had asked the representative
if the value could be much more or less than the
figure he had quoted, he replied that he could not say,
but that it would be ‘close’ to £7,000.
We did not think that a reduction of £940 left a
sum that was particularly ‘close’ to £7,000.
The
firm offered to:
- reinstate
the bond, if Mrs T returned the payment it had sent
her for the proceeds of the policy; or
-
pay her £470 (50% of the difference between the
policy’s actual surrender value and the value it
had quoted over the telephone).
Mrs
T accepted the second option.
....................................
28/16
mis-selling of mortgage endowment policy
Ms
A’s complaint concerned a with-profits mortgage endowment
policy. She said she had been reluctant to take out an
endowment mortgage, but the firm’s representative
had persuaded her to do so. He had told her that the policy
would not only repay her mortgage, but also provide her
with a sizeable lump sum.
complaint
upheld
Because the firm was unable to provide much documentation
about the sale, we asked Ms A to complete our mortgage
endowment questionnaire. Her answers showed that she was
single with no dependents. She was a member of her firm’s
occupational pension scheme and the scheme included life
cover. She had no other savings or investments, and she
described her attitude to risk as ‘Cautious 1’
on a 1–10 scale.
We
concluded that, in the circumstances, the sale of an endowment
policy had been unsuitable. The firm agreed and offered
to pay redress, to be calculated in accordance with Regulatory
Update 89.
However,
when Ms A was given details of the redress, she told the
firm that this was insufficient. She said she wished it
to calculate redress using her own, ‘more appropriate’,
formula. She refused to accept our assurance that the
formula the firm was using was that set down by the regulator
for use in all such cases.
All
attempts at mediation failed, so the matter was referred
to an ombudsman for a final decision. The ombudsman confirmed
that the complaint should be upheld and that the firm’s
offer had been correctly calculated, in accordance with
the regulator’s guidance. Ms A then decided to accept
the firm’s offer.
.......................................
28/17
unit trust ISA – customers disagree with trust’s
conversion to an OEIC
Several
years after Mr and Mrs Y each invested £3,000 in
a unit trust ISA (Individual Savings Account), the firm
contacted all unitholders about a proposed conversion
of the unit trust to an OEIC (Open Ended Investment Company).
For the proposal to succeed, at least 75% of unitholders
had to vote in favour of the conversion.
Although
Mr and Mrs Y voted against it, the proposal went ahead.
The couple then complained to the firm that, as a result
of the conversion, they felt they no longer held the policies
they had ‘requested and signed for’.
complaint
rejected
We established that, under the terms and conditions of
the original unit trust, the firm had the right to propose
the conversion. And once the required number of policyholders
had voted for the conversion, the result was binding on
all unitholders, irrespective of how or whether they voted.
Mr
and Mrs Y did not suffer any financial loss as a result
of the conversion. And they still retained the right to
transfer their ISA to another firm if they felt their
investment was no longer appropriate. We therefore rejected
their complaint.
................................
28/18
investment in corporate bond and gilt fund – whether
adviser’s letter to switch funds constituted advice
In
1997, on the firm’s advice, Mrs M invested £7,500
in the firm’s corporate bond and gilt fund. Three
years later, Mrs M wrote to the adviser because she had
concerns about the fund’s poor performance. In his
reply, the adviser wrote:
‘You
may wish to consider transferring your plan into another
fund, such as the European Fund, and I am enclosing our
Investment Record which shows the performance of our funds,
for your information’.
As
a result, Mrs M decided to switch funds. However, within
a fairly short time, the value of her investment dropped
considerably more than it would have done had she not
switched. She complained to the firm, saying she held
it responsible for her losses. She maintained that the
adviser had suggested the switch and she said he had not
told her that the European Fund represented a greater
risk than her existing investment. When the firm refused
to uphold her complaint, she came to us.
complaint
upheld
We considered that the adviser’s letter had constituted
a recommendation and had encouraged Mrs M to take a specific
course of action. If the adviser had not intended his
words to be understood as giving advice, then he should
have made that clear.
If he had intended to advise Mrs M, then he should
first have made sure he was fully aware of her current
circumstances and requirements. He should also have explained
that she would be increasing her exposure to risk if she
switched.
We ordered the firm to make good any loss that Mrs M had
suffered as a result of switching, and to pay her £250
for distress and inconvenience.
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from
the Financial Ombudsman Service