An adviser recommended a capital-protected structured product to get the best return on Deborah’s savings. Was this reasonable advice?
What happened
Deborah asked her bank for investment advice because she was disappointed with the interest she was getting on her savings. An adviser recommended she invest some of her money in a capital-protected structured product.
The investment was for a term of four years. It was guaranteed to return the amount invested, plus total growth of between 2% and 18%. Growth would depend on how the FTSE 100 index performed over the term.
When the investment period came to an end, Deborah got her money back plus growth of around 4%. She was disappointed because it was less than she’d have got if she’d left her money where it was.
She complained to her bank about the advice she’d received saying she’d never have invested if she’d known how little the investment would grow.
Unhappy with the response, she brought her complaint to us.
What we said
Deborah’s adviser had a responsibility to make sure anything he recommended was a suitable investment product for her needs and financial goals.
We noted the maximum growth of 18% over the term of the investment worked out at less than 5% a year. We also found that, at the time of the sale, the bank was offering a fixed-rate deposit account for a four-year term guaranteeing a return of 5% per year.
We were satisfied Deborah was looking to achieve the highest return she could from her money without putting it at risk. She was also prepared to tie it up for the longer term.
The bank was offering an alternative product with the same term that guaranteed growth equivalent to the maximum available from the structured investment. And the savings account was risk free. There was no chance it would return a much lower amount.
So we didn’t think the structured product was suitable. If the adviser had fully explained Deborah’s options, we thought she would have invested in the fixed-rate account where total growth was guaranteed.
We upheld Deborah’s complaint. We told the bank to calculate the difference between what Deborah received from her investment and what she would have got from its fixed-rate bond. We said it should pay this to Deborah as compensation, plus simple interest at 8% per year from when her structured investment ended.