Bad advice?

Dhubhglas

My sister-in-law, who is even less finance-savvy than I, was advised to invest £10 000 in a RBS stocks & shares ISA by the bank's FA. She is a 70-year-old with meager funds. Even less now since her investment is now worth just over £5 000. The bank approached her with an offer to manage her saving to maximise benefit. As the advice was spectacularly wrong, given her circumstances, and clearly biased, has she a malpractice claim against the bank?

cos69

She might have a case but your best bet is to take this up in the first instance with the RBS. It all depends on what she said and what they said when she met the FA

If no satisfaction from them - ie put her in a situation where her money was in a savings account instead, then you need check the disputes procedure they have which probably means it goes to the ombudsman.

opinions4u

The fact that the fund has fallen in value is no reason for a claim. If her attitude to risk has been appropriately investigated, alongside ensuring that she has an appropriate balance of savings and investments, there is no case.

What she needs to clarify is why they thought it was best advice to invest in that sort of fund.

Does she have any paperwork supporting this recommendation? If not she should ask the bank to confirm why they recommended this to her before pursuing an official complaint.

purch

given her circumstances, and clearly biased

She should have a case, but no doubt RBS will have a piece of paper somewhere, that she didn't get a chance to read but signed anyway saying she agrees that she is a "daredevil" and perfectly happy to invest her life savings in this way.

It will be hard to win such a case, even though logic and common sense say's she was mis-advised.

Dhubhglas

Thanks to all responders for their wisdom.

earlgrey_3

Sorry to hear that.

Thousands of people throughout this year have been persuaded to invest by financial advisers, both those employed by banks and insurance companies and "independent" financial advisers, even though more experienced investors or those who got better advice sat on the sidelines or moved to cash. Even Moneybox on the radio was telling listeners "cash is king" so there was no excuse for advisers to be unaware of the increased risks. As a result, a huge number of small savers have lost large chunks of their savings with no comeback.

On this forum, we've even seen people encouraged to invest with what is essentially borrowed money by an IFA so can only assume that's common too.

Unless she's a higher rate tax-payer or above the age-allowance levels, the chances are she wouldn't ever gain any tax advantage from an S&S ISA. They are widely used as a sales gimmick. (Unlike cash ISAs.)

Why have they given such bad advice? Because the vast majority of both tied advisers and IFAs are dependent on commission. Unless they persuade the punters to invest they don't earn. They will always be biassed towards encouraging investment whatever the outlook.

Unfortunately there is usually no comeback for such bad advice from advisers and the adviser can walk away with their commission. It isn't classified as mis-selling. Your best bet might be the course suggested by Purch in the hope that someone will agree that selling a high-risk equity investment to a 70 year old is mis-selling. If a high proportion of her total savings were involved that should also make a difference.

A lot of small investors will gradually learn how much of their investments they've lost and it would be good to see legislation to protect the vulnerable against what common-sense would recognise is bad or irresponsible advice.

Blah99

purch wrote: »

She should have a case, but no doubt RBS will have a piece of paper somewhere, that she didn't get a chance to read but signed anyway saying she agrees that she is a "daredevil" and perfectly happy to invest her life savings in this way.

It will be hard to win such a case, even though logic and common sense say's she was mis-advised.

I'm not so sure, bearing in mind her age and (assuming the OP's comment of "meagre funds") lack of capital I think she would definitely have a case. Even if RBS do have that bit of paper anyone can easily argue that a competent investment professional would never advise that kind of investment in her situation, which in civil law falls under "special knowledge or responsibility". I'd make a complaint, take it to the Ombudsman and if necessary to court. Won't cost her a penny to do it either, and for an amount that small I bet RBS would settle.

purch

anyone can easily argue that a competent investment professional would never advise that kind of investment in her situation

I sincerely hope that you are right.

Cook_County

I have succeeded in recent years in 2 similar cases of misselling for an elderly relative when sorting out his estate after he had died.

I think there is a high chance of success, my only problem is that RBS is now mostly owned by us all so I will end up paying the compensation out of my personal income tax!

magnum_pi

In the first instance complain, verbally or in writing, to RBS. They then have 8 weeks to sort out the complaint. It can take longer than 8 weeks, but at that point you can complain to the Financial Ombudsman Scheme.

I would say there is a good chance of having the complaint upheld. They will take into account things like her age, experience of investing, her asset concentration (how much of her money is invested compared to how much is on deposit), if the adviser followed company policy in dealing with elderly customers, and many other factors.

If the compalint is upheld then redress would be to put her in the same position as if she had kept the money on deposit.

domino1953

I've read through the assorted replies and can see that our dear contributors have a varied range of knowledge about these things. RBS advisors (in common with most others) are required by FSA rules to provided a "reasons why" letter for every recommendation they make. The letter must not only clearly explain why the product is right for the customer, but also why other options were not recommended. Failure to do this can lead to disciplinary action, dismissal and worst of all loss of FSA registration. Whilst it seems odd that someone of this age would be investing in stocks & shares, most ISA's of this type offer a range of funds with different risk levels. Not being party to the discussion its impossible to judge why this product was sold, but like all things equity related, just because the value has falen, doesn't mean it won't rise again. The other serious error is saying that RBS adviors receive comission - they absolutely do not!