FOS raps 8 adviser firms over ‘unsuitable’ Keydata advice

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The Financial Ombudsman Service has revealed the details of upheld complaints against eight IFAs related to “unsuitable” Keydata advice.

Between 9 and 16 May, the FOS ruled twice against Care Asset Management and once against Lighthouse Advis-ory Services, Chase de Vere, Kilsby Williams & Gould, Dodd Murray and two unnamed IFAs.

In the separate judgments issued in the space of a few days but only published this week, the FOS ruled many of the firms showed a “complete disregard” for clients’ interests.

It found that clients who had invested hundreds of thousands of pounds were given “poor advice” and not made fully aware of the risks associated with Keydata investments.

Around 30,000 investors lost £450m when Keydata collapsed in June 2009. Many have claimed from the Financial Services Compensation Scheme, which has separately sought to recoup money from advisers.

The FOS says it has received about 100 complaints against IFAs for Keydata advice and is about half-way through resolving them.

The FOS decision notices are legally binding judgments if the client accepts. Since April the FOS has been publishing notices under new rules enacted in the Financial Services Act 2012.

Chase de Vere advised a client to transfer their £54,000 PEP into the Keydata secure income bond. The FOS ruled that the advice was “entirely at odds” with the client’s objectives and demonstrated a “complete disregard” for their circumstances and risk profile.

Care Asset Management gave “unsuitable” advice to two clients investing £30,000 and £7,000 into Keydata secure income plans.

Kilsby Williams & Gould advised its client to invest £80,000 in a Keydata income property bond and £40,000 in a secure income plan.

In separate decisions, Lighthouse and Dodd Murray were found to have acted with “complete disregard” for clients’ interests and provided “unsuitable” advice.

Both cases involved clients who were advised to invest “significant” undisclosed sums.

In two more separate cases, unnamed IFAs were told they should have exercised professional judgement over advice suitability.

Yellowtail Financial Planning managing director Dennis Hall says: “There are underlying risks with these complex products and these risks needed to be pointed out to Keydata clients. 

“Now the FOS is publishing decisions, people might start to see they can get 100 per cent of the money rather than just FSCS payouts.”

Chase de Vere and Dodd Murray declined to comment. Care Asset Management, Lighthouse and Kilsby Williams & Gould were unavailable for comment.

FOS decisions: Keydata case studies

Care Asset Management

A now-deceased 83-year-old woman was advised to invest £30,000 into a Keydata secure income plan to pay for her care home. The FOS ruled the advice was “unsuitable” for her risk profile of five out of 10 as the investment contained “numerous and significant risks”. The judgment says the IFA should have foreseen risks in Keydata and the client could not be expected to spot them in sophisticated and complex products. Payments should be made to recover the full amount plus 2.5 per cent interest since Keydata defaulted on 13 November 2009.

Chase de Vere

Clients invested £54,000 in the Keydata secure income bond and took out a separate Isa with the same product. The FOS ruled the investment advice was “entirely at odds” with the client’s risk appetite, which it rates as four out of 10. The ombudsman dismissed claims by the IFA that Keydata was a respected product provider and said it should have exercised its professional judgement. The FOS ruled that the client should be returned to the position she would be in if she had never taken out the product, plus 2.5 per cent interest since Keydata defaulted.