Not upheld: suitability of discretionary investment management and alleged breach of FCA rules complaint against HSBC Bank UK plc

Decision detail

Summary

Mr and Mrs T complained that HSBC's discretionary investment manager failed to comply with FCA rules by investing them in an unsuitable Income Portfolio that failed to achieve capital growth and did not keep up with inflation. The ombudsman found the Income Portfolio was suitable for their agreed investment objectives of capital growth with future income and their lower risk profile. Although the portfolio underperformed against benchmarks, poor performance alone does not evidence mismanagement or breach of FCA rules; it reflects the DIM exercising judgment as they were supposed to do. HSBC complied with FCA suitability and reporting requirements, and Mr and Mrs T were fully informed about the model portfolio approach and the limitations of the service. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman concluded that the Income Portfolio was suitable for Mr and Mrs T's agreed investment objectives and lower risk profile, particularly given their requirement for income. The discretionary investment manager properly managed the portfolio within its stated objectives and risk profile, and there was no evidence of mismanagement. Poor portfolio performance alone does not evidence wrongdoing; it reflects the DIM exercising judgment as they were supposed to do. HSBC complied with FCA suitability rules (COBS 9) by ensuring the portfolio remained suitable for the investment mandate, and with reporting requirements (COBS 16) by providing periodic statements and annual review letters confirming suitability. Mr and Mrs T were fully informed about the model portfolio approach, the correlation between risk and reward, and the limitations of the service, particularly as Mr T had extensive product knowledge.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website