St James’s Place (SJP) has paid £54,000 in total to the sons of a deceased couple who received financial advice in the lead up to their death, the ombudsman has found.
Mr and Mrs E, as referred to by the Financial Ombudsman Service (FOS), had their portfolio reviewed by SJP in 2007, when the firm recommended a second whole of life (WoL) policy, an investment bond and two trustee bonds.
Mr and Mrs E died in 2012 in 2014 respectively, after which their sons, as the executors of their parents' estate, complained to SJP about its advice.
In 2016 SJP made an initial offer of compensation to the pair, which it lifted in April 2018 to £54,000. The sons were unhappy with the amount offered and referred the complaint to the ombudsman. In the interim SJP paid £20,000 to the complainants.
The executors claimed the WoL policy, which was recommended to mitigate a potential inheritance tax liability, was unnecessary as no inheritance tax liability was created from their death.
The ombudsman found that, while ultimately no liability was created, "the case for a potential liability of around £67,000 was identified" at the time of advice and therefore SJP's advice was reasonable.
SJP acknowledged that some of the annual premiums for the WoL policy were funded by withdrawals from Mr and Mrs E's trustee bonds and included investment loss for these amounts in its compensation offer.
The executors claimed their parents' investment bond was funded by the surrender of tax-efficient investments, which resulted in losing the benefits of that money.
SJP calculated investment loss using the ombudsman's medium risk benchmark plus interest and offered to pay inheritance tax liability in relation to the bond. The sons complained that the two trustee bonds had been similarly funded by existing investments, the surrender of which cost money including market value reduction.
The bonds were set up to be automatically encashed upon Mr and Mrs E's death, but the two sons had been led to believe the bonds would continue and would have benefited from a stock market recovery.
For the bonds, SJP calculated investment loss, plus interest and offered to refund the cost of the market value reduction incurred when surrendering the existing investments.
The ombudsman acknowledged the son's "strong feelings about the (SJP) representative's actions and SJP's response to the matter" but concluded the firm's offer was fair and reasonable.
SJP has been ordered to pay the men their original offer of £54,000.
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