Upheld: Service failures generally complaint against Fairstone Financial Management Limited
Financial Ombudsman decision DRN-5101256 of 2025-01-10T00:00:00+00:00. Service failures generally complaint against Fairstone Financial Management Limited. Outcome: Upheld.
Decision detail
| Reference | DRN-5101256 |
|---|---|
| Decision date | 2025-01-10T00:00:00+00:00 |
| Firm | Fairstone Financial Management Limited |
| Product | Other regulated product |
| Claim type | Service failures generally |
| Outcome | Upheld |
| Remedy | Fairstone must: (1) Refund the £2,792.05 annual ongoing advice fee, preferably into Mr J's pension; (2) Calculate notional investment loss from June 2023 to October 2023 (when Mr J ceased the agreement) assuming the refunded amount was invested in line with Mr J's other investments in the same proportions; (3) Calculate additional growth/loss from October 2023 to the date of acceptance of the decision based on Mr J's actual subsequent investments or, if unavailable, using the FTSE UK Private Investors Income Total Return Index as benchmark; (4) If there is a loss, pay the additional compensation into Mr J's pension plan (adjusted for tax relief and charges) or, if not possible, pay directly to Mr J with a notional tax adjustment (20% reduction for basic rate taxpayer, or 15% if tax-free lump sum applicable); (5) Pay £200 compensation for distress and frustration; (6) Provide clear explanation of all calculations. |
Summary
Mr J complained that Fairstone unfairly charged him an annual ongoing advice fee of £2,792.05 despite not providing the service the charge related to. Mr J had a service agreement entitling him to annual investment reviews and a dedicated personal client relationship manager. After Mr J complained about his previous adviser in July 2022, Fairstone ceased that adviser's contact with him but did not assign a new dedicated adviser until April 2023, leaving a nine-month gap. When a new adviser was assigned, an introductory meeting was arranged for June 2023, which Mr J understood would be purely to allow the adviser to introduce himself. However, Fairstone subsequently sent Mr J an annual review report dated 9 April 2023 (before the meeting) just five days after the June meeting, treating it as his annual review without clear communication. The Ombudsman upheld the complaint, finding Fairstone failed to deliver fair and transparent service, did not maintain the dedicated adviser relationship promised, and did not properly conduct the annual review. Fairstone was ordered to refund the fee with compensation for investment loss and £200 for distress.
The Ombudsman's reasoning
The Ombudsman found that Fairstone failed to deliver the service Mr J was entitled to expect under his service agreement. Although Fairstone was entitled to charge an ongoing advice fee, it was not fair to do so in these particular circumstances. The key issues were: (1) there was a nine-month period without a dedicated adviser following Mr J's complaint about his previous adviser, contrary to the service agreement's promise of a 'one stop access point'; (2) the June 2023 meeting was presented to Mr J as introductory only, but Fairstone subsequently treated it as the annual review without clear communication to Mr J; (3) the annual review report was dated 9 April 2023 and sent 21 June 2023, five days after the meeting, suggesting it was prepared in advance without Mr J's input; (4) the review report lacked the detail expected of a proper annual review and did not accurately reflect Mr J's circumstances; (5) Mr J had explicitly stated he did not want an annual review until his complaint was resolved, but his complaint was still outstanding in June 2023; (6) there was no clear communication that the purpose of the meeting had changed from introductory to annual review, preventing Mr J from making an informed decision about whether to proceed. The Ombudsman concluded Fairstone did not act fairly and reasonably in delivering the service or in charging the fee.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| Fairstone Financial Management Limited, all decisions | 39 | 55% |
| Service failures generally, all decisions | 32,767 | 33% |
| Other regulated product, all decisions | 51,105 | 30% |
Source
Read the original decision on the Financial Ombudsman Service website