An investor, Bill, classed as ‘adventurous’ complained to us when funds didn’t perform well and he claimed they were too risky for him. We stepped in to decide a fair outcome.
What happened
Bill had recently inherited £150,000. He got in touch with a financial adviser because he wanted to invest some of the money.
The financial adviser asked Bill some detailed questions about his personal circumstances and his attitude to investment risk.
On the basis of the answers Bill gave, the adviser told him that his attitude to risk was ‘adventurous’. The adviser recommended that he invest £50,000 in an Open-Ended Investment Company (OEIC) split between three funds: 10% in ‘cautious’, 20% in ‘moderate’ and 70% in ‘dynamic’ funds.
But when the funds didn’t perform as well as he had hoped, Bill complained to the financial adviser. He said he was concerned that the funds were too risky and he’d made it clear that he had a medium attitude to investment risk.
When the financial adviser rejected Bill's complaint, he referred it to us.
What we said
We looked carefully through the financial adviser's paperwork. We noted that the adviser had asked Bill about his attitude to risk. He’d given Bill a series of statements and asked him to respond to them. His response to the statement ‘I’m willing to take substantial financial risk to earn substantial return’ was ‘strongly agree. And he’d put ‘strongly disagree’ in response to the statement ‘when it comes to investing, I'd rather be safe than sorry’.
We also looked at Bill's responses to the questions about his personal circumstances. He’d confirmed that he was self-employed, single and that he didn't have any dependants.
The adviser had also written to Bill explaining that investments that match an ‘adventurous’ attitude to risk were speculative and had pointed out that ‘the risk to your capital is high’.
Finally, we noted that Bill had told the adviser that he had previous experience of investments. Bill himself had initially suggested a portfolio involving funds in China, India, Latin America and Africa.
Taking everything into account, we were satisfied that Bill had been prepared to take a high level of risk with his money and that his financial circumstances meant he was in a position to do so. In these circumstances, we concluded that Bill had not received inappropriate advice, so we didn’t uphold the complaint.