We (Boz Michalowska from Leigh Day and me) met with the Financial Ombudsman Service (FOS) on 7th May. They have received 549 claims so far relating to Woodford, Link, Hargreaves and IFAs. They have resolved 3 at final decision stage and these were simple cases against IFAs. We were given no evidence to suggest that the FOS route is likely to have a quick nor successful resolution. ShareSoc cannot give financial advice and individuals must of course make their own decisions.
ShareSoc continue to endorse the Leigh Day claim. Nothing new has emerged from our conversations with FOS, except perhaps the information about simple IFA claims.
The meeting followed ShareSoc’s letter to FOS and their reply. FOS reply 2021-04-16 to Cliff Weight
FOS referred us to the published decisions against IFAs on their website:
https://www.financial-ombudsman.org.uk/files/303132/DRN-2443143.pdf this upheld Mr B’s complaint against the IFA and assessed loss on the following basis:
Compare the performance of Mr B’s investment with that of a benchmark; FTSE UK Private Investors Income Total Return Index
If the fair value is greater than the actual value there is a loss and compensation is payable.
If the actual value is greater than the fair value, no compensation is payable.
Actual value = This means the actual amount paid from the investment at the end date.
Mr B may not eventually receive the value placed on his investment in the fund at the end date. In the meantime, he also won’t be able to sell his investment and invest the proceeds elsewhere. To fairly address this, the IFA should:
- Use the value placed on Mr B’s remaining investment in the Woodford Equity Income fund at the end date when determining the total actual value of his investment.
- Pay Mr B a return that would likely be generated by the size of this investment in a two-year period.
The IFA should calculate this by using the average annual return from the benchmark above over the past 20 years.
The IFA may appropriately deduct any proceeds Mr B received from the liquidation since the end date and prior to the date of their calculation
Fair value = This is what the investment would have been worth at the end date had it produced a return using the benchmark.
https://www.financial-ombudsman.org.uk/files/300525/DRN-2107432.pdf against IFA not upheld.
My comments are as follows:
Neither case is relevant to the Link Claim. They may be relevant to a potential claim against HL where HL gave advice.
The Mr B case is really interesting and would appear to set quite a useful precedent, for cases where there has not been the proper contact between the IFA and the client and hence the IFA is at fault. The way the ombudsman calculates the loss is interesting as well. Mr B’s pension was c £100k in 2017, so the claim will be worth the loss in value from 2018 onwards, (say of the order of 30% as I don’t have the exact data to hand) plus the assumed “normal” (sic – as the data period and returns were not normal in the least) returns over c 3 years = c 10% – (I don’t know why they use the last 20 years, not 10 years or 100 years, but from May 2001 to May 2021 it went from 2152 to 3512 = +70% or about 3%p.a., which is a very low rate of return.).
Mrs M tried to claim from 2017. She lost her claim. I wonder if she had claimed for losses from 2018, she might have got a different response. This highlights the difficulty of using the FOS, in my humble opinion.
Cliff Weight, ShareSoc Woodford Campaign Director