Not upheld: General financial advice complaint against EQ Investors Limited

Decision detail

Summary

Mr and Mrs F complained to the Financial Ombudsman Service about advice received from EQ Investors Limited in 2016 to transfer their portfolio to discretionary model portfolios, which resulted in approximately £40,000 in capital gains tax liabilities. They argued that EQ should have considered their personal tax position and preserved their wealth in real terms net of all costs, including tax. The ombudsman found no evidence in the documentation that EQ had agreed to consider their personal tax position, noting that the service agreement explicitly excluded tax considerations and that most of their investible assets were held elsewhere with an alternative adviser that had priority access to tax allowances. The ombudsman concluded that Mr and Mrs F, as experienced investors, would have understood that discretionary model portfolios do not benefit from tax allowances and would attract standard tax liabilities, and that the investment objective of 'preservation of capital in real terms' referred to maintaining value against inflation, not net of all costs. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found no evidence in the documentation that Mr and Mrs F had agreed with EQ that it should consider their personal tax position in managing the discretionary portfolios. The service agreement explicitly excluded tax considerations from EQ's remit. The ombudsman noted that with most of Mr and Mrs F's investible assets held outside the discretionary portfolio, it would have been impractical for EQ to manage the overall tax position. The ombudsman also found that Mr F, as an experienced investor familiar with tax-advantaged investments like VCTs and EISs, would have understood that discretionary model portfolios do not benefit from tax allowances and would attract standard tax liabilities. The ombudsman rejected the argument that 'preservation of capital in real terms' should be interpreted as net of all costs including tax, finding no evidence this was agreed. The ombudsman noted that capital gains are evidence of successful discretionary management and profit realisation, and that Mr and Mrs F were offered alternatives (advisory service) which they declined.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website