“Adventurous” risk grade inaccurate

Bonds Investments

Alan felt he had been mis-sold an investment. We agreed that the business had not correctly assessed his risk appetite.

What happened

Soon after retiring, Alan decided that he wanted to invest a lump sum to generate an income to supplement his pension. The business advised him to put £80,000 into a bond that invested in a range of property funds outside the UK. But when Alan lost a significant proportion of his investment, he complained that he’d been sold something that was too risky.

How we helped

Although the business had recorded Alan's attitude to risk as ‘adventurous’, we didn’t think this was an accurate reflection of his circumstances and needs at the time. It was clear that Alan wasn’t in a position to replace any capital that he lost and that the bond wasn’t a suitable product to provide a steady income stream.

Also, some of the funds that the bond was investing in were based in developing countries. So not only was Alan exposed to currency risk, but those property markets were more volatile than the UK equivalent. This hadn’t been explained to Alan when he made the investment.

Putting things right

We concluded that it was inappropriate for the business to recommend that Alan invest the whole £80,000 into a single bond focused on overseas property investment.