The customer was disappointed with her interest on savings, so changed to a capital protected structured product following guidance from an adviser. We looked at what happened next.

Compensation awarded when bank fails to fully explain investment options

What happened

Deborah asked her bank for investment advice because she was disappointed with the interest she was getting on her savings. She met with an adviser who recommended she invest some of her money in a capital protected structured product instead.

The investment was for a term of four years. It guaranteed to return the amount invested plus total growth of between 2% and 18%. The amount of growth depended on the performance of the FTSE 100 index during the term.

When the investment ended, Deborah got her money back plus growth of around 4%. She said that was less than she would have got if she’d left her money were it was and that she’d never have invested if she’d known that could happen. She said she was told she’d get 18% growth.

How we helped

When we looked at the available evidence, including the product literature she received, we thought it showed Deborah was told she’d definitely get 18% growth. But she’d received advice and the adviser had a responsibility to make sure anything he recommended was suitable.

We noted the maximum growth of 18% over the term of the investment equated to less than 5% per year. We also found that at the time of sale the bank was offering a fixed-rate deposit account for a term of four years 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, and that she was prepared to tie it up for the longer term. Because the bank was offering an alternative product with the same term that guaranteed growth equivalent to the maximum available from the structured investment, and crucially without the risk of getting a much lower amount, we didn’t think the structured product was suitable.

If the adviser had fully explained her options, we felt Deborah would have instead invested in a fixed-rate account where total growth was guaranteed over a similar term.

Putting things right

We told the bank to calculate the difference between the amount Deborah received from her structured investment and the amount she would have got from its four-year fixed rate bond over the same period. We said it should pay this amount to Deborah as compensation plus simple interest at 8% per year from the date her structured investment ended.