Monday, 13 February 2012


Dear listener

Thank you for your recent email.

I am sorry to hear your investment of £100,000 has fallen in value to £45,000 and that the guarantees you were offered have been withdrawn.

But I am not surprised.

You were trying to do two impossible things.

First, you were trying to invest with no risk that you could lose money. Such schemes are fraught with difficulties and any ‘guarantee’ that losses will be protected can never be relied on.

Second, you were trying to hide your assets from Inheritance Tax. That is difficult to achieve and can never be guaranteed against changes in the law or action by HM Revenue & Customs to render the scheme ineffective.

Schemes which attempt to achieve either of these objectives tend to put your money at more risk and have higher charges than straightforward investments.

Higher charges of course erode the value of your investments more quickly.

Such schemes are widely sold even though the outcomes they offer are extremely difficult to achieve and impossible to guarantee. Of course selling them will make money both for the adviser and the scheme managers even if the objectives are never achieved for the investor.

You may well have a claim for mis-selling against your financial adviser if he or she did not explain the risks clearly at the outset. In addition the marketing material you were given may well have breached the FSA principle which says it has to be ‘clear, fair and not misleading’. Other principles, including treating customers fairly, paying due regard to their interests, and conducting business with due skill, care and diligence, may also have been breached.

You should make a formal complaint to your financial adviser saying that you do not believe you were treated fairly or with due regard for your interests. Set out the promises you understood were being made. If you consider that the information you were given breached the principle of being ‘clear, fair and not misleading’ then say that too. Mention those other principles which, from what you tell me, may also have been breached. Ask to be put back in the position you would have been in if those promises had been fulfilled - in other words you would at least have not lost any money. 

If you did not say specifically that were willing to take a risk with your money – in other words you did not agree that you were happy to lose money as well as make it – then you could also ask to be put back in the position you would have been in now if a risk-free investment had been recommended. Such investments are offered by National Savings and Investments and, for amounts up to £85,000, by any deposit account at a bank or building society.

The adviser has eight weeks to deal with your complaint to your satisfaction. If they do not reply or the reply fails to meet your expectations you can refer the complaint to the Financial Ombudsman Service which I recommend you do.

best wishes

Paul Lewis