FOS publishes case studies on client risk attitude

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FOS’ Natalie Ceeney

The Financial Ombudsman has published a series of investment complaint case studies which centre around disputes about clients’ attitude to risk at the point of sale.

The FOS says it continues to see a significant number of complaints where investments were recommended that carried an inappropriate level of risk for the consumer. It has published the case studies to demonstrate its approach to judging these complaints and how it calculates redress.

The FOS explains why it upheld certain complaints. In one case, a financial adviser recommended a couple invest the bulk of their £75,000 investment in stock market funds, with the remainder in gilts. They told the adviser they wanted to take a small amount of risk but wanted returns to supplement their income. The FOS judged the adviser should have explained the couple needed to take more risk to achieve their objectives, and that the adviser was not justified in putting the bulk of the investment in shares.

In another case, a bank adviser recommended a retired couple to cash in one of their with-profits bonds and invest £20,000 in a property fund. The bank could not explain why it made the recommendation.

Yellowtail Financial Planning managing director Dennis Hall says: “This all comes down to record keeping. Where firms were able to demonstrate what was said and how risk was determined, the complaints were rejected.”