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

Decision detail

Summary

Mr and Mrs T invested in HSBC's PIMS Income Portfolio in 2015 seeking capital growth and future income. Mr T was a recently retired HSBC employee with extensive product knowledge. The portfolio underperformed their expectations and failed to keep pace with inflation. In 2024, they complained that the discretionary investment manager failed to make suitable investments, failed to provide adequate suitability statements, and failed to exercise proper discretion. The ombudsman found the Income Portfolio was suitable for their agreed objectives and lower risk preference, that the DIM properly managed the portfolio within its stated objectives, and that underperformance does not evidence mismanagement or FCA rule breaches. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that the Income Portfolio was suitable for Mr and Mrs T's agreed investment objectives (capital growth with income requirement) and their lower risk preference, despite their moderate risk tolerance. The discretionary investment manager properly managed the portfolio within its stated objectives and risk profile, and there was no evidence of mismanagement. The portfolio's underperformance against benchmarks and inflation does not evidence wrongdoing, as it reflects the DIM exercising judgment in active management. HSBC complied with COBS 9 suitability rules and COBS 16 reporting requirements by providing periodic statements and annual review letters confirming suitability. Mr and Mrs T were fully informed about the model portfolio approach, its limitations, and the correlation between risk and reward, and chose to remain invested.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website