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Coutts suitability headache lingers after ombudsman ruling

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Coutts suitability headache lingers after ombudsman ruling

The Financial Ombudsman Service (FOS) has upheld three separate complaints against Coutts regarding compensation to clients following the private bank’s suitability review.

Although Coutts completed the suitability review it started in 2014 back in December 2016, with total costs remaining within the £200 million provision set aside, a string of cases have been taken to the FOS since then.

One of the latest complaints involved Mr S, who was advised to invest £1 million in an offshore investment bond. This was split £750,000 across five hedge funds and £250,000 in cash. Following its suitability review, Coutts could not evidence the suitability of the hedge funds for Mr S and offered compensation of around £118,000.

However, the client argued that he was entitled to more and that he should also be compensated in relation to the offshore bond.

Following its review, the ombudsman upheld the complaint and told Coutts to calculate compensation by comparing the performance of Mr S’s investment to that of the FTSE UK Private Investors Income Total Return index, up to a maximum of £150,000 plus any interest. This should also include charges related to the offshore investment bond.

Similarly, another client, Mrs S, complained about the £52,000 compensation she was offered after investing £230,000 into the Coutts Orbita Global Opportunities hedge fund in 2009. The ombudsman again determined that the fair compensation should be calculated based on the FTSE benchmark.

He said: ‘I consider that its lack of knowledge about her remained largely the same during its review in 2014, so it follows that during that review Coutts was in no better a position to say what type of Coutts product would have been suitable for Mrs S in 2009.’

He added: ‘Coutts presented itself as a “whole of market” adviser to her, so the alternatives that were available to her in 2009 would have been marketwide – not restricted to the wealth enhancement model range.’

The third case concerned Mr and Mrs I who, in June 2008, invested ‘a substantial sum in an unregulated collective investment scheme in the UK… they surrendered this investment in April 2009 at a considerable loss’.

They rejected a £3,000 compensation offer. Although the amount they invested and the compensation determined are not revealed, the ombudsman decided that for half of the investment, the FTSE index should be used and for the other half the average rate from fixed rate bonds, to calculate the fair amount.

A Coutts spokesperson said the private bank frequently reviews the advice it provides clients. Referring to its ‘past business review’, the spokesperson stated: ‘The review concluded in 2016 and clients have been offered redress where appropriate. Coutts’ advice model aims to provide professional wealth management advice that is highly geared to meet the complex investment and structuring needs of private clients across the UK.’

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