Lyndhurst Financial Management Limited · DRN-6155952

The complaint Mrs L complains that she received unsuitable investment advice from Lyndhurst Financial Management Limited (“Lyndhurst”) as it exposed her invested funds to too much risk. What happened Mrs L met with Lyndhurst in October 2021 to discuss her investment requirements. Her personal circumstances were recorded in a fact find as follows: • She was 61, retired and had no financial dependents. • Her net income was £31,914 per annum and this was made up of income from her personal pension and her late husband’s pension. • Her monthly income was £2,659 and her monthly expenditure was £1,657 leaving her with a monthly disposable income of £1,002. • She had £597,000 in cash deposit accounts. • She had £50,000 in NS&I bonds. • She had no liabilities and had no investments. • Her husband had passed away seven months earlier and she was beginning to settle into her new lifestyle but was still trying to establish her actual income requirements but was looking to receive income of £3,000 a month. Mrs L completed an investment profiler which asked her about her investment experience, appetite for risk and capacity for risk. Mrs L was first asked seven questions about her investment experience. She said: • She had previously had a cash savings account, a cash ISA or savings bonds without taking any professional advice. • She had never had a pension where she could choose the funds she invested in. • She had never had a Stocks and Shares ISA or a managed investment fund. • She had never bought or sold individual shares on a stock market. • She only reviews the value of her pensions or investments when she sees a major financial event in the news. • She doesn’t recall the value of her investments ever falling substantially. • She is not confident or very comfortable with investing. Mrs L was then asked the following fifteen questions about her attitude to risk: • To achieve financial success, I would take financial risks – Mrs L answered “disagree”. • I would take more financial risk if there was a chance I could make a lot of money - Mrs L answered “disagree”. • I am the kind of person who takes financial risks - Mrs L answered “disagree”. • I prefer certainty about the future value of my investments, even if it means making less money - Mrs L answered “neither agree or disagree”. • Rises and falls in the value of my investment would not worry me - Mrs L answered “disagree”.

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• If the value of my investment fell, even for a short time, it would concern me - Mrs L answered “neither agree or disagree”. • I would generally avoid investments whose values rise and fall over time - Mrs L answered “neither agree or disagree”. • I would frequently choose investments offering a steady return rather than those which could rise a lot in value - Mrs L answered “agree”. • Missing an investment opportunity concerns me more than making a loss - Mrs L answered “neither agree or disagree”. • I care more about avoiding losses than making money - Mrs L answered “agree”. • Taking financial risks causes me a lot of stress - Mrs L answered “agree”. • I would regret deciding not to take a risky investment opportunity if it then performed well - Mrs L answered “neither agree or disagree”. • When considering investing, I would describe myself as - Mrs L answered “slightly concerned”. • The term I most closely associate with financial risk is - Mrs L answered “worry”. • The statement about risk-taking that best describes me is: I take risks - Mrs L answered “rarely”. Mrs L was then asked the following five questions about her capacity for risk. She said: • She wanted her investment to meet a range of goals. • She could afford a small loss without it having a significant impact on her future standard of living. • The earliest she planned to take money from her investment was within a year. • She planned to leave her money invested and withdraw amounts only as needed. • It was unlikely that she would need to access her investments early as she had emergency funds. Following this, Lyndhurst provided Mrs L with a suitability report in November 2021. This explained that Mrs L’s objective was to invest £400,000 from her cash deposit accounts to provide additional income of £500 per month and to achieve some capital growth. The suitability report recorded Mrs L’s risk profile as five out of ten following her completing the attitude to risk questionnaire and in conjunction with discussions around her knowledge, experience and capacity for risk. Lyndhurst recommended that Mrs L invest £20,000 in a Stocks and Shares ISA and £380,000 in a GIA. Mrs L was advised to invest in the Lyndhurst Sustainable Growth Excluding Property Risk Profile 5 Portfolio because it would provide long term capital growth in line with her attitude to risk. Lyndhurst has confirmed that the asset allocation was as follows: • Cash 8.54% • Bonds – 22.03% • Equities – 69.43% Mrs L complained to Lyndhurst in March 2025. In summary, she said Lyndhurst had failed to adequately assess her financial situation, including her attitude to risk, which resulted in her being recommended investments which her exposed her to more risk than she was willing to take. Lyndhurst considered Mrs L’s complaint but didn’t uphold it. In summary, it said: • Mrs L’s attitude to risk was correctly evaluated and the recommended investments were suitable due to her small demand for income and capacity for loss.

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• The term of Mrs L’s investments was deemed to be medium to long term and so three and half years is too short a timeframe to evaluate performance. • It has evaluated Mrs L’s risk annually as part of the ongoing advice service and she has not said she wasn’t comfortable with the level of risk. • It agreed to reduce Mrs L’s ongoing management fee from 1% to 0.8%. Mrs L didn’t accept Lyndhurst’s findings and so she referred her complaint to this service for an independent review. One of our investigators considered Mrs L’s complaint and felt it should be upheld. In summary, they said that whilst they were satisfied that Mrs L had the capacity to accept some losses, due to her having £174,000 remaining in deposit-based accounts, as well as £50,000 in NS&I bonds, and that it was suitable for her to be recommended to utilise her £20,000 per year ISA allowance in a Stocks and Shares ISA and invest the remaining in GIA, they felt that Lyndhurst had exposed her funds to more risk than she was willing to take. They said that Mrs L’s attitude to risk questionnaire showed she had no previous investment experience and she wasn’t confident or comfortable with investing and so they didn’t think exposing her investments to almost 70% in equities was in line with her risk appetite. To put things right for Mrs L, the investigator said Lyndhurst should compare the performance of Mrs L’s Stocks and Shares ISA and GIA with a benchmark. Mrs L accepted the investigator’s findings, but Lyndhurst didn’t. In summary, it said: • It reviewed the and agreed risk profile in each annual review and Mrs L didn’t raise any concerns. It added that she was accompanied by her brother who was an experienced investor with Lyndhurst. • It didn’t think the redress methodology the investigator set out was the fair way to put things right. It said it would have been more suitable to compare the performance of the Lyndhurst Growth Sustainable Blend Risk profile 5 with the other lower risk profiles, because this is what it would have advised her to invest in. • It provided information to show Mrs L would have been worse off if she had been advised to invest in one of the lower risk profiles, so it felt she hadn’t suffered a financial loss. As Lyndhurst didn’t accept the investigator’s findings, the complaint has been passed to me 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. Having done so, I’ve reached the same conclusions as the investigator and for broadly the same reasons. In particular, I agree with their assessment of the significance of Mrs L’s responses to the risk-based questions and how Lyndhurst interpreted these when recommending her investments. Ultimately, it was for the advisor to fully and fairly assess Mrs L’s attitude to investment risk. Also to fully and fairly set out the potential implications of her assessment of her risk appetite and of the proposed recommendations. Different businesses use different risk assessment tools in order to try and understand a client’s appetite for risk, if any. They also have differing numbering systems and differing classification systems. Any tool can only offer a partial

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insight into a client’s risk appetite and needs to be considered alongside their needs, objectives or objective capacity for loss. This is why it is not for this service to assess each and every tool available on the market or to solely consider a client’s agreed or chosen risk classification number when assessing the appropriateness of a recommendation. When looking at the questions Mrs L gave in regard to her investment experience, appetite for risk and capacity for risk, I think it’s clear that she had very little investment experience and had never held a Stocks and Shares ISA or GIA before. It is also clear that she wasn’t confident in investing and was looking to take a cautious approach to investments. She also could only afford to make a small loss. Taking her answers into account with her circumstances at the time, it is clear that Mrs L was looking to make a small increase in her monthly income by £500 and to realise some capital growth. As such, I think she was prepared to put some of her money at risk but, taken in totality, I don’t think her answers show that she was looking to take a large risk with her money. Turning to Lyndhurst’s recommendation to invest £400,000 into the Lyndhurst Sustainable Growth Excluding Property Risk Profile 5 Portfolio (£20,000 by way of the Stocks and Shares ISA and £380,000 in a GIA). I’m satisfied that the amount Lyndhurst recommended Mrs L invest was suitable considering this left her with substantial cash reserves of £174,000 held in deposit-based accounts and £50,000 in NS&I bonds. I’m also aware that she had no immediate requirement for access to her invested funds. Looking at the level of risk of her investments, Lyndhurst has confirmed that asset allocation of the Lyndhurst Sustainable Growth Excluding Property Risk Profile 5 Portfolio was as follows: • Cash 8.54% • Bonds – 22.03% • Equities – 69.43% I’m not persuaded it was suitable to expose Mrs L’s invested funds to almost 70% in equities and it exposed her money to the risk of significant falls if the markets overall fell sharply. I acknowledge that it also allowed the opportunity for it to grow by more than other, arguably safer investments, if things went well. But looking at Mrs L’s experience and answers to the risk questions, she had no prior experience investing in equites and was clearly only willing to take some risk and so I don’t think the asset allocation matched the level of risk she was willing to take. I’m satisfied that Lyndhurst ought to have recommended Mrs L to take no more than a modest risk with her money, and on balance, I am satisfied that the investigator’s proposed redress formula is fair and reasonable. I appreciate Lyndhurst says it would be fairer to use one of its lower risk portfolios as a benchmark however, I don’t agree for the reasons given by the investigator. Namely, that it is not clear which of the proposed alternative portfolio’s would have been most suitable for Mrs L. Putting things right Fair compensation

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In assessing what would be fair compensation, I consider that my aim should be to put Mrs L as close to the position she would probably now be in if she had not been given unsuitable advice. I take the view that Mrs L would have invested differently. It is not possible to say precisely what she would have done differently. But I am satisfied that what I have set out below is fair and reasonable given Mrs L's circumstances and objectives when she invested. What Lyndhurst Financial Management Limited should do To compensate Mrs L fairly Lyndhurst Financial Management Limited should: • Compare the performance of Mrs L’s investment with that of the benchmark shown below and pay the difference between the fair value and the actual value of the investment. If the actual value is greater than the fair value, no compensation is payable. • It should also pay interest as set out below. • Provide the details of the calculation to Mrs L in a clear, simple format. Income tax may be payable on any interest awarded. Portfolio Name Status Benchmark From (“start date”) To (“end date”) Additional interest Mrs L’s Stocks and Shares ISA and GIA Still exists and liquid For half the investment: FTSE UK Private Investors Income Total Return Index; for the other half: average rate from fixed rate bonds Date of investment Date of settlement Not applicable Actual value This means the actual amount payable from the investment at the end date. Fair value This is what the investment would have been worth at the end date had it produced a return using the benchmark. To arrive at the fair value when using the fixed rate bonds as the benchmark, you should use the monthly average rate for one-year fixed-rate bonds as published by the Bank of England. The rate for each month is that shown as at the end of the previous month. Apply those rates to the investment on an annually compounded basis. Any withdrawal from Mrs L’s Stocks and Shares ISA and GIA should be deducted from the fair value calculation at the point it was actually paid so it ceases to accrue any return in the

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calculation from that point on. If there is a large number of regular payments, to keep calculations simpler, I’ll accept if you total all those payments and deduct that figure at the end to determine the fair value instead of deducting periodically. Why is this remedy suitable? I have chosen this method of compensation because: • Mrs L wanted capital growth with a small risk to her capital. • The average rate for the fixed rate bonds would be a fair measure for someone who wanted to achieve a reasonable return without risk to her capital. • The FTSE UK Private Investors Income Total Return index (prior to 1 March 2017, the FTSE WMA Stock Market Income total return index) is a mix of diversified indices representing different asset classes, mainly UK equities and government bonds. It would be a fair measure for someone who was prepared to take some risk to get a higher return. • I consider that Mrs L’s risk profile was in between, in the sense that she was prepared to take a small level of risk to attain her investment objectives. So, the 50/50 combination would reasonably put Mrs L into that position. It does not mean that Mrs L 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 Mrs L could have obtained from investments suited to her objective and risk attitude. Further information The information about the average rate can be found on the Bank of England’s website by searching for ‘quoted household interest rates’, clicking on the related link to their database, or by entering this address www.bankofengland.co.uk/boeapps/database, clicking on: Interest & exchange rates data / Quoted household interest rates / Deposit rates – Fixed rate bonds / 1 year (IUMWTFA) and then exporting the source data. There is guidance on how to carry out calculations by following this link: https://www.financial ombudsman.org.uk/businesses/resolving-complaint/understanding- compensation/compensation-investment-complaints My final decision I uphold this complaint and instruct Lyndhurst Financial Management Limited to pay compensation as outlined above. Under the rules of the Financial Ombudsman Service, I’m required to ask Mrs L to accept or reject my decision before 27 April 2026. Ben Waites Ombudsman

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