Upheld: Investment mis-selling complaint against Fairstone Financial Management Limited
Financial Ombudsman decision DRN-5070451 of 2025-03-24T00:00:00+00:00. Investment mis-selling complaint against Fairstone Financial Management Limited. Outcome: Upheld.
Decision detail
| Reference | DRN-5070451 |
|---|---|
| Decision date | 2025-03-24T00:00:00+00:00 |
| Firm | Fairstone Financial Management Limited |
| Product | Investment |
| Claim type | Investment mis-selling |
| Outcome | Upheld |
| Remedy | Fairstone must: (1) Compare performance of Mr and Mrs B's investment against the monthly average rate for one-year fixed-rate bonds as published by the Bank of England, applied on an annually compounded basis; (2) Pay the difference between fair value and actual value if fair value is higher; (3) Deduct withdrawals from fair value calculation at point of payment; (4) Pay £150 for distress and inconvenience caused by unsuitable advice. Income tax may be payable on any interest awarded. |
Summary
Mr and Mrs B complained that compensation offered by Fairstone for unsuitable investment advice was inadequate. In 2021, Fairstone advised them to invest £340,000 entirely in a general investment account, despite their clear intention to ringfence approximately £290,000 for children's education over seven years requiring regular withdrawals. Fairstone accepted the advice was unsuitable but proposed redress based on a deposit account benchmark, which Mr and Mrs B disputed. The ombudsman upheld the complaint and directed Fairstone to use the Bank of England fixed-rate bond benchmark to calculate fair compensation, representing the low-risk return Mr and Mrs B should have achieved, plus £150 for distress and inconvenience.
The Ombudsman's reasoning
The ombudsman agreed with the investigator's approach that the fixed-rate bond benchmark should be used as a proxy to represent returns achievable with no or very limited risk. Since Fairstone accepted that investing school fees money requiring immediate and regular access was unsuitable, Mr and Mrs B should not have been exposed to market volatility. While it cannot be definitively stated what they would have done instead, the fixed-rate bond benchmark fairly represents the type of return they could have achieved in a low-risk environment appropriate to their objectives.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| Fairstone Financial Management Limited, all decisions | 39 | 55% |
| Investment mis-selling, all decisions | 14,206 | 37% |
| Investment, all decisions | 14,114 | 34% |
Source
Read the original decision on the Financial Ombudsman Service website