Not upheld: Investment mis-selling complaint against HSBC UK Bank Plc

Decision detail

Summary

Mr and Mrs B complained that HSBC gave them unsuitable advice in 2020 to switch their ISAs from the Schroder MM Diversity Fund to the HSBC World Selection Conservative Portfolio, arguing the Schroder fund subsequently outperformed and they were motivated by fees. The ombudsman found the advice was suitable because the Schroder fund had significantly underperformed the HSBC fund over the preceding five years, it was reasonable to recommend lower risk given their inexperience and recent loss of income, and the lower ongoing charges would recoup the advice fee within seven years. The ombudsman rejected their argument that later taking higher risk with an IFA proved the HSBC advice unsuitable, noting their circumstances had materially changed with the inheritance and advisers may reasonably differ in recommendations.

The Ombudsman's reasoning

The ombudsman found the advice suitable based on multiple factors: (1) the Schroder fund had significantly underperformed the HSBC fund over the five years prior to 2020, with no indication it would improve; (2) although the attitude to risk questionnaire indicated 'High Risk', it was reasonable for the adviser to recommend lower risk given Mr and Mrs B's inexperience, age, recent loss of income, and lack of actual experience with investment losses; (3) the HSBC fund's composition of 27.78% equities and 57.4% fixed income (including some higher-risk bonds) was suitable for their circumstances; (4) the lower ongoing charges in the HSBC fund (1.35% vs 1.74%) would recoup the advice fee within seven years; (5) the fact that Mr and Mrs B later invested an inheritance at higher risk with an IFA did not make the HSBC advice unsuitable, as their circumstances had materially changed and advisers may reasonably differ in their recommendations; (6) the adviser's recommendation letter was likely an accurate reflection of the discussions that took place.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website