Upheld: Investment mis-selling complaint against Redmayne-Bentley LLP

Decision detail

Summary

Mr and Mrs H inherited a £310,000 investment portfolio in 2017 and engaged Redmayne-Bentley to manage it on an advisory basis at a low-medium risk level. As cautious, inexperienced investors in their late 50s and 60s, they indicated they preferred steady returns with minimal fluctuation and had limited capacity to absorb capital losses. However, Redmayne-Bentley maintained an entirely equity-based portfolio with no fixed interest securities throughout the relationship, contrary to its own guidance for low-medium risk investors. In 2021, they were advised to invest in two niche investment trusts (Digital Infrastructure 9 and Gore Street Energy) without being informed of the specific risks involved. After these investments lost significant value, Mr and Mrs H sought alternative advice and raised a complaint. The ombudsman upheld the complaint, finding the portfolio represented medium-level risk unsuitable for their cautious profile and that they were not given clear information about investment risks. Redmayne-Bentley must compensate them based on a 50/50 benchmark of fixed rate bonds and the FTSE UK Private Investors Income Total Return Index, plus 8% simple interest on any loss.

The Ombudsman's reasoning

The ombudsman found that while individual investments may be assessed in isolation, a portfolio must be considered as a whole to determine suitability. Mr and Mrs H's attitude to risk questionnaire clearly indicated they were cautious investors preferring steady, less volatile returns with minimal capital loss risk. Redmayne-Bentley's own 2017 guidance stated that low-medium risk portfolios should be invested primarily in categories 1-3 assets and that investors should have a small capacity to absorb capital losses. However, the portfolio was entirely equity-based with no fixed interest securities (category 1 investments) at any point, and later included niche, recently-listed investment trusts in specialist sectors. The ombudsman concluded this represented medium-level risk rather than low-medium risk, and that Mr and Mrs H were not given clear, fair, and non-misleading information about the specific risks of these investments to make informed decisions. The suitability letters failed to explain sector-specific risks or how investments fitted within overall portfolio risk. The ombudsman rejected Redmayne-Bentley's arguments about fee deduction, end date, and benchmark selection, finding that the 50/50 benchmark (fixed rate bonds and FTSE UK Private Investors Income Total Return Index) fairly reflected the risk profile Mr and Mrs H should have been advised to take.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website