In the lates in a list of failures on the part of Quilter’s Wealth Management arm, the Financial Ombudsman Service (FOS) has upheld a complaint against an appointed representative (AR) of Quilter for providing unsuitable advice pertaining to Individual Savings Accounts (ISAs).

In 2015, the Quilter AR recommended Mr. and Mrs. S invest their savings in order to pay off their mortgage. The couple was recommended to move £30,280 from their current ISAs and bank deposits into new ISAs in a balanced managed fund, with £6,000 in cash as a buffer.

Their plan was to pay off their mortgage in ten years, with £250 monthly invested in the ISAs. But the adviser subsequently worked out that £250–£300 monthly would be required to hit the £120,000 goal, although even that would see them short by some £30,000 in ten years’ time.

The Quilter AR proposed a blend of investment income and mortgage payments to bridge the shortfall but did not give Mr and Mrs S projections of the likely shortfall. Thus, they started paying £250 a month since 2016 unaware that the investments would be insufficient to make the mortgage payment. Although the adviser recommended review meetings in 2018, 2019, and 2021, the couple rejected them.

By February 2021, when they met the adviser again, they were instructed to increase their monthly contributions to £200 from £100, which they found excessive. In April 2021, revised estimates showed that their ISAs were still short of the £120,000 goal, so the adviser instructed them to increase their payments to £350 to £500 per month or add seven more years to their investment.

A deficit of £32,000 in mortgage payment.

Realising they wouldn’t be at their goal within 2025, Mr and Mrs S agreed to contribute higher amounts of £300 each month from July 2021 so that the mortgage would be cleared in 2028. Delays were also experienced by the Quilter AR, though, and they hadn’t had any revised estimates until July 2022. Their ISAs would only total £87,358, short of their target of £119,377 by £32,019.

One of the Financial Ombudsman Service (FOS) investigators discovered that Quilter AR had provided unsuitable advice in 2016, which was specifically regarding the underestimation of the contributions of Mr. and Mrs. S to achieve their mortgage target.

The Quilter AR took issue with conclusions, stating the numbers provided as assumptions instead of formal advice. In addition, it stated that Mr. and Mrs. S had been directed to seek the advice of their mortgage lender but had refused to attend annual review meetings. The Quilter AR also referenced a statement from the FCA stating that consumers are responsible for their own financial decisions.

Ombudsman Decision: Errors Resulted in Financial Damage

The Financial Ombudsman Service ultimately ruled that Quilter’s 2016 error was to blame for the financial shortfall in the couple. The ombudsman ruled that if proper advice had been provided in the first place, then Mr. and Mrs. S would most probably have made more regular contributions, which would have wiped out or minimised the shortfall.

The judgment also rejected the Quilter AR’s contention that it had no liability for the couple’s spending decisions. The FOS reasoned that the spending and saving behaviours of the couple might have been shaped by inaccurate advice and hence saved less compared to what they would have achieved.

Since the Quilter AR could not provide enough evidence to dispute the FOS investigator’s report, the complaint was confirmed. The ombudsman classified this ruling as “fair and reasonable based on the available evidence.”

The FOS directed the Quilter AR to pay Mr and Mrs S by:

• Covering the investment growth they missed out on.
• Six years’ worth of interest on twenty-five percent of the contribution deficit.
• Offering a cash incentive for distress.
• Interest on the redress amount paid from July 2022 up to the date of payment.

Our Thoughts

It is likely that this particular claim was in no way malicious and was simply an error by the financial adviser. However, as a regulated individual who was charging the client fees, it is right that the clients would expect the contributions on the ISA to be sufficient to cover the mortgage.

Quilter are ultimately responsible as they are responsible for the compliance and oversight of their advisers and appointed representatives. Whilst it is more than likely that Quilter as one of the largest and most successful financial institutions in the world, provided their adviser with access to accurate calculators and forecasting tools, their failure to recognise that the adviser had failed to recognise and address the shortfall sooner is ultimately why the FOS ruled in the clients favour. After all, if the clients could work out complicated financial forecasts themselves, keep track and recognise coming shortfalls, then why pay a financial adviser fees in the first place?

This is a great example of how varied financial adviser claims can be.

When it comes to financial adviser claims there is no, one size fits all. Except for in matters of extreme groups litigation orders, most cases will be assessed and reviewed on their own individual merits.

It is also not always obvious not just who you need to claim against but why you need to claim, you just simply know that something is wrong.

If you are comfortable navigating financial adviser claims yourself then we recommend raising a complaint to your financial adviser as a starting point. However, if you are either not comfortable, no inclined or simply do not have the time to manage your own pension, financial adviser or investment claim, why not book a free no-obligation review with one of our experts today.