It has recently been announced that a complaint about a recommendation by the IFA to invest in Arch Cru is going to be upheld by the Financial Ombudsman Service. Some have said that the regulator is opening the floodgates for people to make complaints about bad advice.
In the case the IFA gave advice that proved incorrect and the people that invested complained about the advice they received and the IFA have recently been ordered to repay the amount that they told the client to invest. Speculation is that because this will make cases against IFA more accessible and many others are going to complain if they get poor advice that turned out to be a bad investment.
Regulatory Legal’s director is Gary Fatchett who has commented, “It is very unusual for the Financial Ombudsman Service to make a ruling in this direction, they are just asking for trouble from other people who’ve been given advice that hasn’t worked out. We are setting up a group seeking judicial review on the package that the people have been awarded.”
The decision has recently been published and involved a couple who had invested £8000 in Arch Cru in 2008, around a year later all activities at Arch Cru were suspended. The IFA initially rejected the claim and said that is any problems that occur with a fund are not the responsibility of the person they gave the advice, but the responsibility of the person who manages the fund.
Tony Bormann was the Ombudsman made the ultimate decision on the case and in his ruling he mentioned how the business that had invested was of a modest size. He also made a mention of the fact that the fund was classified as cautious managed, although this might not be entirely accurate. He did highlight in his report however that just because the fund is cautious managed does not mean that it is not volatile.
The ruling said that the entire sum that was initially invested has to be repaid, as does interest which will be paid at the base rate set by the Bank of England plus an additional 1%. Any money that was left in the investment will be returned to the investors and taken off the amount that the IFA has to pay back to their clients.
A spokesperson from the Financial Ombudsman Service has recently stated, “We always look at a complaint on an individual basis, but in this situation we have published guidance so that people can see how we will be looking at cases in future. It should give people an idea of what approach we take and how we handle complaints. So far, we have received complaints from over 100 consumers who’ve had a problem with their IFA’s.”
Despite the ruling, the spokesman also commented about how the redress package from the financial services authority, which is valued at over £50 million is supposed to be distributed. He said that this is for correcting funds that are badly managed, not badly advised investors.