The Ombudsman upheld a complaint from the married couple, Mr and Mrs C, which argued the limited redress offered by Coutts for the mismanagement of their individual portfolios was based on an irrelevant benchmark.
The complaint stretched back to 2008, with an earlier complaint dating back to the 1990s settled privately in 2001.
Coutts had already accepted it “could not be certain that the portfolios matched their investor profiles at the time”, but offered no compensation as it claimed the couple’s portfolios had performed better than the alternative option, Coutts’ Discretionary Investment Management product (DIMA).
The couple fought back and argued the lack of understanding of their investment characteristics meant Coutts was ill-placed to decide the redress benchmark too.
Their portfolios had been wholly equity-based despite their moderate attitude to risk and lack of market experience, the Ombudsman said.
In a decision made on 22 June, FOS ruled the correct benchmark for calculating redress was the FTSE UK Private Investors Income Total Return index.
Coutts, which had already paid the couple £500 to compensate for how long it had taken to resolve the complaint, disagreed.
It argued a skilled person approved by the regulator had recommended using DIMA as a redress benchmark and that their decision should be followed.
However, the Ombudsman’s decision forced Coutts to compensate the couple for the difference in returns from the original portfolio against the new set benchmark returns, and pay interest of 8%.
Ombudsman Roy Kuku said: “In deciding what’s fair, my aim is to put Mrs C and Mr C as close as I can to the position they would probably now be in if their portfolios had not been mismanaged.”
He added: “I am not satisfied that there is enough evidence to say Mrs C and/or Mr C would have invested in the particular DIMA product that Coutts has used as the redress benchmark.
“In contrast, there is evidence that suggests that Coutts did not keep itself sufficiently informed about Mrs C and Mr C (and their circumstances) in order to have known what was suitable for them.
“Overall and on balance, I consider that there is a lack of persuading evidence to suggest the DIMA product is one that Mrs C and Mr C would have found suitable at the relevant time and invested in.”
