In this occasional series of blogs, I recall some memorable cases which I have dealt with.
Mrs H and her vanished inheritance
Read the full story:
Mrs H was referred to me by her new financial adviser, whose clients I had helped in the past. He was concerned that an investment portfolio established by a previous adviser had lost a considerable amount of money – perhaps as much as £1 million – through poor choice of investments.
I should say here that poor investment performance is not actually a valid reason to try to claim compensation. The financial regulator won’t allow it, on the basis that nobody can truly predict in advance how any investment will perform.
Nevertheless, I took the case on, as it is always possible some of the investments were unsuitable, quite apart from being poor performers. Unsuitability is a reason that can give rise to compensation.
It soon became clear to me that poor performance was not at the root of the problem. Yes, some of the investments had performed below expectations, but the portfolio was spread amongst quite a lot of different assets. Such diversity rarely results in the kind of catastrophic decline in value that had happened.
The investment manager provided a breakdown of the transactions on the portfolio, going back to the beginning. They were unbelievably complex! Constant movements in funds and investments, some totalling hundreds of thousands of pounds at a time. Poor Mrs H had no idea about any of it. Although the money was nominally hers (an inheritance), her husband had been given charge of the portfolio.
I asked if she had bank records, as the portfolio values indicated considerable amounts must have been withdrawn over its entire history. No, she had no statements, but we ordered them from her bank. Unknown to Mrs H, she and her husband had about 8 accounts in joint and individual names. And what they showed was money coming in from the portfolio and being spread around the accounts and then disappearing either in spending or further transfers out. Sadly, the truth was out. Mr H had been taking money out of the portfolio for his own use. Over 8 years, he had removed nearly £1 million. It was not easy explaining to Mrs H that the reason her portfolio had declined in value so much, was not down to poor investment performance as had originally been thought by her adviser, but due to her husband’s plundering.
By this time, Mrs H was divorced anyway. And to add insult to injury, Mr H had kept another chunk of the portfolio in the divorce settlement.
Mrs H was, naturally, aghast but knew the money was gone. The best I could do was analyse the investments that she had been recommended to have and, having found some which I believed unsuitable, try to gain some measure of compensation for her. In the end, it was possible to prove considerable loss had been suffered due to unsuitability alone, and compensation of more than £90,000 was achieved. Although only one-tenth of the amount lost, it did at least provide some comfort for Mrs H and boosted what was left of her portfolio by more than a third.