Barry transferred £150,000 to a new fund on his adviser’s recommendation. He became concerned about its performance, and the adviser later said it was likely he would lose some of his money, so he made a complaint and was unhappy with the adviser’s response.
What happened
Barry had been investing through the same financial adviser for fifteen years. In one of their monthly meetings, the adviser recommended that Barry move some of his money from his “wealth preservation” fund into a new “wealth generation” fund to get a better return. Barry agreed to transfer £150,000 to the new fund which included a small proportion in unregulated collective investment schemes (UCIS).
After a year, he began to have concerns that it wasn’t doing so well. In their next few meetings, the adviser repeatedly reassured Barry that he should remain in the fund – saying that investments tend to fluctuate, and that it was nothing to worry about.
However, a few months later, the adviser told Barry that the fund managers had decided to “wind down” the fund – and that it was likely he would lose some of his money.
Barry made a complaint – saying the adviser should not have put him off withdrawing his money before. He was also unhappy with the advice he had been given to invest in the UCIS in the first place. But the adviser insisted the fund had been suitable for Barry. He also explained that his business was not responsible for the loss, as Barry had known about the risks involved from the start.
Barry disagreed with the adviser’s response – and asked us to look into his complaint.
What we said
We needed to establish whether the advice Barry had received about investing in the scheme had been suitable for his circumstances and his attitude to risk. From the adviser’s records, we saw that Barry’s attitude to risk had been recorded as “high”. Under the relevant rules, he fell within the exemption for “high net worth individuals” – meaning he was eligible to have UCIS “promoted” to him. And looking at Barry’s investment history, it appeared that he had invested in other UCIS in the past.
The adviser sent us the documents that Barry had been given about the fund. These clearly stated the risks involved. We also saw from the adviser’s records that he and Barry had discussed the risks in a face-to-face meeting.
In light of this, we decided that it was likely Barry had been aware of the risks involved in the investment. We asked the adviser about his recommendation that Barry stay in the fund.
He said that for customers with long-term investment strategies – like Barry – he had recommended that they keep the investment through the “credit crunch”, as he expected that performance would eventually improve. The adviser sent us a breakdown of how the fund had performed since Barry had originally invested. This showed that, with some fluctuations, the fund had continued to increase in value. The fund also made up only 3% of the total amount of money Barry had in investments overall.
Given this, we did not think it had been unreasonable for the adviser to recommend staying in the fund. Although we appreciated that Barry was disappointed about losing money, we did not uphold his complaint.