Alan approached an investment company who categorised him as having an adventurous attitude to risk and advised him to invest accordingly.
What happened
Soon after retiring, Alan decided that he wanted to invest a lump sum to generate an income to supplement his pension. He approached an investment firm, which advised him to put £80,000 into a bond that invested in overseas property funds.
Months later, Alan lost a significant proportion of his investment. This came as a shock to him, so he contacted the investment firm. After learning more about the fluctuations in value of his investment, he complained that what he’d been sold was too risky for him.
Unhappy with the investment company’s response, he brought his complaint to us.
What we said
When we looked at the investment company’s suitability report and fact-find, we saw that it had recorded Alan's attitude to risk as “adventurous”.
We didn’t think this was an accurate reflection of his circumstances or investment needs at the time.
It was clear that Alan wasn’t in a position to replace any capital that he had lost and that the bond wasn’t a suitable product for Alan. It wouldn’t provide the steady income stream that he’d said he wanted when he discussed matters with the investment company.
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.
The investment company hadn’t explained this to Alan when he made the investment.
For these reasons, we concluded that the investment company’s recommendation was inappropriate. A single bond focused on overseas property was not a suitable investment for Alan to invest all his £80,000 in.
We asked the business to pay Alan what he’d lost with interest to put him back into the position he’d have been in if he hadn’t made the investment in the first place.