Couple lost £43k in 18 months on £700k investment as banking crisis emerged
A judge has rejected a couple’s claim their adviser breached a continuing duty of care to them by failing to “correct” his original recommendation of a medium risk portfolio following the onset of the 2008 market crash.
Judge Andrew Keyser QC ruled the Lloyds Bank IFA gave suitable advice leading to the original investments in 2007, and was justified in not suggesting the portfolio had become unsuitable for the couple once their investments began to fall a year later, at hearings in the England & Wales High Court last month.
The IFA, working for Lloyds’ Mayfair Asset Management Service, also made the “reasonable” judgement that no immediate decision should be taken to sell the portfolio once its value began to decline, the judge ruled.
Philip and Wendy Worthing invested £700,000 in a “balanced” – described to the couple as a medium risk – investment portfolio in January 2007, with proceeds from the £5m sale of a recruitment business.
However, in July 2008 following the onset of the banking crisis, and for other reasons, the claimants surrendered their investment, receiving back just over £657,000.
In a claim first lodged against Lloyds in 2013, they argued the £43,000 loss was due to bad advice to invest in a balanced portfolio at outset – as they said they were only prepared to tolerate “low” levels of risk – and in the Lloyds IFA’s failure to “correct” his initial mistake in a review meeting in March 2008.
It was reasonable to give advice that no immediate decision should be taken to sell the portfolio
But judge Keyser QC rejected the claims. In hearings that took place on 8, 9 and 10 September, he noted the claimants’ case relating to the original meeting in 2007 was now statute-barred as it occurred more than six years before proceedings began.
However, he said the advice was suitable and that the couple “understood that it was a medium-risk investment, they knew what that meant and they knew what they were getting”.
Concerning the review meeting in 2008, which was not statute-barred and by which time the global financial crisis of 2007/08 had begun, the judge ruled the IFA did not breach a continuing duty of care to alter his original recommendation.
He also defended the adviser’s “reasonable” suggestion to remain invested to allow for recovery.
“The contention that [the Lloyds IFA] was in breach of a strict obligation to correct the error in its original investment advice fails because the original advice was not given in error and because there was no such strict contractual obligation,” the case judgement reads. http://www.bailii.org/ew/cases/EWHC/QB/2015/2836.html
“The contention that it nevertheless failed to advise the claimants that the portfolio was not now suitable for them fails because their attitude to risk had not changed, because it was reasonable to give advice that no immediate decision should be taken to sell the portfolio, and because the future investment objectives of the claimants with regard to the portfolio could not at the time be properly assessed.”
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