Not upheld: unsuitable advice - IHT planning complaint against Prosperity Wealth Management Limited

Decision detail

Summary

Mr and Mrs R, as trustees of the R Trust, complained that Prosperity Wealth Management provided unsuitable advice by recommending a whole of life insurance policy with a £2.5 million sum assured for IHT planning, rather than a term assurance policy to age 75 combined with a gifting strategy. They argued the WoL recommendation was commission-driven and more expensive than the alternative. The ombudsman found the WoL policy was a suitable recommendation given their circumstances and objectives at the time, including their focus on capital growth and property portfolio development with young children. While a term assurance/gifting strategy was possible, it would not have been a better fit with their recorded objectives, and the reduction in sum assured reflected pension provision outside the estate rather than commission considerations. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that a whole of life policy with fixed premiums and a sum assured matching the calculated IHT liability is a widely used and generally suitable approach for IHT planning, providing certainty that a specific sum will be available when needed. While a term assurance/gifting strategy was a possible alternative, it would not have been a better fit with the clients' recorded objectives at the time, particularly given their children were young, they were focused on capital growth and property development, and there was no clearly documented aim to use gifting for IHT management. The reduction in sum assured reflected the pension provision outside the estate and did not suggest commission-driven advice, as reducing the sum assured actually reduced the commission received. The ombudsman was not persuaded that even if Prosperity had explained the alternative strategy, the clients would necessarily have opted for it over the WoL recommendation.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website