The FOS has ruled an IFA who put a third of a 90-year-old widow's money into Keydata while she was in a care home gave unsuitable advice.
FOS' adjudicator says the £44,000 investment in a Keydata Secure Income Plan, approximately 31% of the elderly widow's retirement fund, was not "sensible advice".
He also rules the investment was unsuitable because the "arrangement is complex and sophisticated" , and the 90 year-old or her son who legally took advice on her behalf would have had "difficulty appreciating the risks involved in this arrangement".
FOS recommends the unnamed IFA pay the woman compensation of her orignal investment, less any income received, plus compound interest at Bank base rate from the date of the investment.
In the adjudication, seen by IFAonline, the Ombudsman also warned about the risks associated with traded life-settlement polices, which backed Keydata plans.
"Investors, principally, are gambling on the longevity of the insured and on the administrators of the schemes' ability to predict that," it states.
"It therefore appears that there is the real potential for the arrangement as a whole to fail."
Prior to the ruling, the woman's son lodged a complaint with the IFA but had it rejected by the firm, which said the advice given was "suitable, based on sound reasonable assessment of information available at the time of advice and had been explained clearly in terms of risk".
However, IFAonline has learned the same IFA advised the 90 year-old care home resident to invest £60,000 in the Scottish Life International Personal Investment Managed Service, which in turn was 100% invested in the Marlborough Global Fund of Funds.
As the complaint to FOS relates only to Keydata, the Ombudsman has considered the investment in isolation of the rest of the elderly widow's financial affairs.
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