St. James's Place Wealth Management Plc · DRN-5951716

The complaint Ms H complains, with the help of a professional third party, about the advice and service she has received from St. James's Place Wealth Management Plc (‘SJPWM’). Ms H says the advice she received, to open an investment bond and ISA, was unsuitable for her. She also says that SJPWM has failed to provide the ongoing service which she believes she has been paying for. What happened Ms H first met with SJPWM in February 2005. SJPWM has provided a copy of a fact-find that was completed on 4 February 2005, recording information about Ms H’s circumstances and objectives. This also recorded that SJPWM had provided Ms H a copy of its terms of business and initial disclosure document on that day. The fact-find noted that Ms H was 26, single with no financial dependents. It recorded that she was doing temporary work at the time which provided an equivalent annual salary of £13,000. SJPWM noted Ms H was seeking permanent employment and set out several opportunities she had for this which were discussed. Her monthly income was noted as exceeding her expenditure, which included rent, leaving her a modest amount of £365 in disposable income each month. SJPWM noted Ms H had only recently moved into her rental property and it said she intended to continue renting for the foreseeable future, potentially looking to purchase a property in the next 5-8 years. Ms H had received approximately £165,000 as an inheritance after her mother had passed away. And she was due to receive a further £58,000 shortly. SJPWM said Ms H wanted to invest £137,000 of the money she now held to achieve capital growth over the medium to long term and provide a regular income that would cover her rental payments. SJPWM recorded that Ms H had a medium attitude to risk (‘ATR’). SJPWM wrote to Ms H on 1 March 2005 setting out its recommendation. The letter repeated its summary of her circumstances. SJPWM recommended that Ms H take out an investment ISA and make the maximum contribution for that tax year of £7,000. It also recommended that she open an investment bond, investing the remaining £130,000. Both products were provided by St James’s Place UK plc - part of the same wider group as SJPWM but a separate entity. SJPWM said that the recommended products allowed Ms H to invest across a spread of managed funds, in line with her balanced ATR. It said this was affordable as it meant, after other expenditure, Ms H had a remaining £11,000 as an emergency fund. The bond also provided the facility to make withdrawals of up to 5% of the balance each year without tax being due and monthly withdrawals of £541.66 were to be set up. It was noted that the investment bond had an early surrender charge if surrendered within six years (reducing each year). But SJPWM repeated that Ms H’s intention to buy a property was not expected to take place for 5 to 8 years. A personalised illustration for the bond referred to the product provider making payments (direct renumeration) to the adviser each year for “arranging the plan and providing ongoing

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servicing throughout its term”. It said that these amounts were paid out of the deductions shown in the illustration. These included the annual management charge and investment management charges, but no separate ongoing adviser fee. The illustration also repeated information about the early surrender charge. Ms H accepted SJPWM’s advice and the investments were opened in March 2005. She deposited additional funds into both investments shortly after they were opened, which I understand were from the further inheritance monies she received. Ms H’s representatives complained to SJPWM on her behalf in March 2024. In short, they said the initial advice had been unsuitable for Ms H. They said the advice had not paid regard to products available from other providers, Ms H had been advised to invest too soon after her mother had passed away, she’d been tied in to a product with exit charges even though she’d intended to purchase a property with her siblings in the short term and Ms H had been subject to ongoing advice fees for which SJPWM hadn’t provided any service. SJPWM didn’t agree that the advice to take out the investment products was unsuitable for Ms H or that the timing was unsuitable – noting that the information from the time didn’t support any planned large expenditure, such as a house purchase, within five years. And it explained she had not been charged ongoing advice fees nor had it agreed to provide an ongoing service. SJPWM did however accept that Ms H likely had a more cautious attitude to risk than the medium ATR that had been recorded. And the investments recommended were likely not suitable to her circumstances. To address this, it said it would conduct a loss assessment, which it did at that point, using the benchmarks our Service usually recommends, and compensate Ms H for any losses, as well as paying £150 for any distress caused. Ms H’s representative asked our Service to consider the complaint. One of our Investigator’s looked into it but felt the offer to resolve matters already made by SJPWM was fair and reasonable. Ms H’s representative said that she did not agree with the Investigator’s findings and still believed the advice was unsuitable. They said a number of the things recorded in the fact find were potentially inaccurate and that Ms H was actively seeking to purchase a property at the time of the advice. They also said that the fact find was not countersigned by Ms H and she didn’t recall having received or reviewed the recommendation letter. As an agreement could not be reached, the complaint has been passed to me to decide. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. I’ve taken into account relevant law and regulations, regulator’s rules, guidance and standards and codes of practice - many of these are found in the Financial Conduct Authority’s (‘FCA’) handbook under the Principles for Businesses (‘PRIN’) and the Conduct of Business Sourcebook (‘COBS’). I’ve also thought about what I consider to have been good industry practice at the time. And where the evidence is incomplete, inconclusive or contradictory, I reach my conclusions on the balance of probabilities – that is, what I think is more likely than not to have happened based on the available evidence and the wider surrounding circumstances. There are essentially two parts to Ms H’s complaint – one about the suitability of the advice she received from SJPWM in 2005 and the other about whether SJPWM was required to,

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and did, provide an ongoing service. For ease of reading this decision, I’ll address these issues separately. Ongoing services and whether SJPWM needed to provide these Ms H’s representative has said that she’s paid for ongoing advice services which haven’t been provided. But I haven’t seen any evidence of her making direct payments to SJPWM for ongoing services or of an agreement for it to provide any specific ongoing services. The initial advice took place prior to the Retail Distribution Review (‘RDR’) in 2012. Prior to the RDR, it was common for the advising or arranging agent that helped establish investments, to be paid “trail commission”. This tended to be payable for the lifetime of the investment. Trail commission was paid by the product provider, in this case St James’s Place UK Plc, rather than the consumer. It was normally funded by the annual management fees the provider charged. And the product illustration confirms that an arrangement of this type was in effect here, noting that the product provider, rather than Ms H, would pay SJPWM and this would be funded from the ‘deductions’ set out within the illustration. The deductions section confirmed an annual management charge (‘AMC’) was payable and that there were some other management charges applicable to specific funds. But there was no mention of Ms H incurring a separate fee for ongoing services from SJPWM. I haven’t seen any evidence of her later being charged a separate fee. And I’m satisfied that the trail commission was paid from the AMC. Trail commission was usually payable simply for having sold or arranged the investment and receiving it didn’t require the advising business to provide ongoing advice or services. Unless that is the advising firm had contractually agreed, separately, to provide specific ongoing services. But while the illustration from the product provider suggested the commission was “for arranging this plan and providing ongoing servicing” I haven’t seen any evidence of SJPWM agreeing or committing to provide ongoing services to Ms H. After the RDR, trail commission was not allowed on new products sold. But it could continue to be paid under existing agreements where it was already payable, without creating an obligation on the adviser to take any further action, unless it agreed otherwise. And again, I’ve seen no evidence that SJPWM committed to provide a service to Ms H post RDR. In any event though, as Ms H has not directly paid SJPWM for an ongoing service, there hasn’t been a financial loss in respect of this issue. She has paid AMC’s to the pension provider (St James Place UK plc). And the provider has in turn paid trail commission, funded from the AMC’s. So, Ms H has essentially made indirect payments to SJPWM. But even if commission was not being paid by the product provider to the adviser, I’ve seen nothing to indicate that the AMC for the product would not still have been payable. Nor have I seen any evidence that the AMC charged would have been any lower. So, Ms H would always have incurred the same costs that she has here. The suitability of the advice Ms H’s representative has set out several arguments as to why the advice was unsuitable. The first of which was that SJPWM didn’t consider other alternatives available on the open market, because it was restricted in the advice it could give. And they believe that means the advice was unsuitable. It is correct SJPWM wasn’t an independent adviser looking at the whole market and only provided advice on a limited number of options. But that is not an uncommon set up for advisers. And that doesn’t automatically mean that the advice given was unsuitable. Based on the example copies of SJPWM’s terms and conditions that I’ve

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seen, I think its status was likely made clear. The fact-find says SJPWM’s terms and initial disclosure documents were shared with Ms H at the time of the advice. On balance, I think they likely were. And so, I think SJPWM made Ms H aware of its advising status, so that she was in an informed position. Another of the reasons given for the advice being unsuitable was that it took place too soon after Ms H had suffered the bereavement which led to the inheritance of the money that was used to invest. The representative says Ms H was vulnerable and should’ve been given more time to become accustomed to the change in her circumstances the bereavement brought about before advice was given. But while I don’t doubt Ms H was grieving, there is nothing in the information from the time that in my view ought to have led SJPWM to think that Ms H wasn’t capable of understanding the advice given or making financial decisions. And I don’t think the timing of the advice, which SJPWM was asked to provide, makes it unsuitable. The representative also said that information recorded in the fact-find was inaccurate and doesn’t reflect Ms H’s recollections of her circumstances at the time. In particular they have said Ms H was actively looking to purchase a property, which she says she told the adviser, so recommending a policy with early exit charges wasn’t suitable. I’ve taken on board what Ms H and the representative has said. But I would note that these comments about Ms H’s circumstances were made almost 20 years removed from the discussion between her and SJPWM. Memories can, and do, fade with time. And so, while I’ve not disregarded these comments, I’ve ascribed greater weight to the evidence from the time. I note Ms H has said she was actively looking to purchase a property when she took advice in 2005. And her representative has suggested that this led to her incurring significant exit costs. But from the information I’ve seen, while she did make several smaller lump sum withdrawals from her bond between 2005 and 2010, it wasn’t until over five years after the bond was set up that she made a significant withdrawal, that might reasonably have been associated with a property purchase. This appears to support that, as recorded in the fact find, her plans to utilise the money she was investing for this purpose weren’t imminent. And I think this supports that the information recorded was likely to be accurate. There is also nothing to suggest that Ms H’s circumstances and objectives, as recorded in the fact-find and repeated in the recommendation letter, were disputed by her at the time of the advice. The representative has said that the copy of the fact-find that has been provided was not countersigned by Ms H. And she doesn’t recall receiving or reviewing the recommendation letter. But as I’ve said, memories can, and do, fade. I think its very unlikely Ms H would’ve handed over £137,000 of her money without having knowledge of how this was going to be used and on balance I think she did likely receive the recommendation letter and that the fact-find was completed while she was present. And I think therefore SJPWM was entitled to rely on the information that was recorded about her circumstances and objectives as being accurate. And taking everything into account, based on what SJPWM understood Ms H wanted to do – invest the majority of the lump sum she held to achieve growth and provide an income to meet her rent, particularly as her employment future was being considered – I think the products recommended by SJPWM were suitable for her. The investments provided tax efficiency and the facility to draw an income equivalent to her requirements. And, given what it was told about the timescales for Ms H’s plans for using the funds, it was reasonable to conclude at the time that the exit penalties were unlikely to be triggered and didn’t impact the suitability.

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I’m also satisfied SJPWM set out in its recommendation that early encashment penalties would apply to the investment bond in the first six years – and that these reduced over the initial six years after investment. This was repeated in the illustration for the investment bond, which I’m satisfied was likely provided to Ms H. So, I think SJPWM also made Ms H aware of these penalties, before she accepted its advice, and that she was therefore in an informed position to decide whether to proceed. SJPWM has though said, when looking at the complaint, that it thought the investments it had recommended for the money in the ISA and bond were potentially too high risk for Ms H. And I think this conclusion is reasonable. From what I can tell Ms H didn’t have a great deal of investment experience at the time, if any at all. She had inherited a large sum, and I think it is reasonable that she would be looking to achieve some growth. But at the same time, this lump sum formed most of her assets at that time. And, given the uncertainty of her employment situation and the longer term goals she had for the money – which SJPWM recorded, I think her capacity for loss was relatively low. So, I think the assessment of her ATR, of which there is little detail about the methodology used, as being medium wasn’t reflective of her actual circumstances. I agree with what SJPWM has said, that she should have been considered more cautious. And that in turn, different investments should have been recommended. Where a mistake has been made, we look to put a customer, as close as possible, in the position they would otherwise have been in but for the error. Here, as I’ve summarised, I’m satisfied that the products recommended to Ms H were suitable. And I think the advice to take these would have been accepted. But I think the funds should have been invested differently, in lower risk assets, when placed in the same products – which is what SJPWM said when considering the complaint. Putting things right The methodology I would have recommended to address this mirrors what SJPWM said it would do when carrying out a loss calculation at the time it responded to the complaint. This is to compare the actual performance of Ms H’s investments with a fair value for what likely would have happened (accounting for additional sums paid into the investments and withdrawals). To determine a fair value, we commonly say that a business can use benchmark returns, and I think that would be fair here. I’m satisfied that Ms H was willing to accept a small level of risk to achieve her investment objectives. And so, the benchmark values I would’ve recommended, and which SJPWM used, are a 50/50 combination of the FTSE UK Private Investors Income Total Return index (prior to 1 March 2017, the FTSE WMA Stock Market Income total return index) and the monthly average rate for one-year fixed-rate bonds as published by the Bank of England. This does not mean that Ms H would have invested 50% of her money in a fixed rate bond and 50% in some kind of index tracker fund. Rather, I consider this a reasonable compromise that broadly reflects the sort of return Ms H could have obtained from investments suited to her objective and risk attitude. So, the proposal from SJPWM in terms of how it would carry out a loss calculation is, in my view, fair and reasonable. I’m aware that SJPWM ran this calculation at the time that it issued its final response and it established a monetary figure for the loss at that point. Ms H didn’t accept that offer. Part of the reason why, which was set out to our Service, was that she wanted independent clarification that the calculation was fair. I don’t think this is unreasonable in the circumstances. What it does mean though is that the calculation is now out of date as it was to a specific point in time. So, while I’m satisfied that SJPWM is using a fair method to calculate any loss, I think the calculation should be brought up to date. And if this re-

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calculation shows a loss, this should be paid to Ms H. SJPWM must pay the compensation within 28 calendar days of the date on which we tell it Ms H accepts my final decision. If SJPWM fails to pay the compensation by this date, it should pay 8% simple interest per year on the loss, for the period following the deadline to the date of settlement. SJPWM also said it would pay Ms H £150 for the trouble and upset caused. It doesn’t appear that Ms H believed there to have been anything wrong until she spoke to her representative. So, I don’t think she has been caused ongoing distress by the incorrect advice about how her funds should be invested. But I don’t doubt it was disappointing for her to then learn about the mistake. And so, in the circumstances, I think the offer of £150 for this made by SJPWM is fair and should be honoured. My final decision For the reasons I’ve explained, I think the St. James's Place Wealth Management Plc has largely made a fair offer to resolve this complaint. To put things right it should run an up-to-date loss calculation using the method it referred to in its final response and, if this shows Ms H has incurred a loss, it should compensate her for this loss. It should also pay Ms H £150 for any distress caused, as it previously agreed. Under the rules of the Financial Ombudsman Service, I’m required to ask Ms H to accept or reject my decision before 17 April 2026. Ben Stoker Ombudsman

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