Medical Money Management · DRN-6225298

The complaint Mrs C complains that Medical Money Management (MMM) gave her unsuitable advice to invest in an onshore investment bond in 2008. What happened Mrs C says that in 2008 MMM advised her to invest in an investment bond with Canada Life. MMM was acquired by Chase de Vere in 2017, and Mrs C became a client of Chase de Vere regarding the ongoing servicing of her bond. In her complaint Mrs C raised concerns about the actions of both MMM and Chase de Vere. While MMM remain responsible for the advice it gave, Chase De Vere are now responsible for answering this complaint on MMM’s behalf. This decision, however, is solely focused on the actions of MMM. The actions of Chase de Vere since 2017 will be addressed in a separate decision. I’ll mainly refer to MMM in this decision when talking about the actions of Chase de Vere when acting on behalf of MMM. Mrs C complained to Chase de Vere in November 2024 about both the sale of her bond by MMM and the ongoing service she received from Chase de Vere. In the relevant part of her complaint, Mrs C said MMM had advised her to invest in the bond in 2008 which was soon after a traumatic and difficult time in her life. She said it was the first time she’d invested and so she had no experience of investments. Mrs C questioned whether the investment bond was the right choice with so many products and investment options available such as an ISA. Mrs C said she now understood that the profits on her bond were taxed at 20% for the past 16 years but could have been making use of her ISA allowance each year which would have meant her investment was tax free for life. Mrs C said if she’d been advised to invest in an ISA she would have avoided paying tax on the profits and so she’s been financially disadvantaged by the advice. And if she were to surrender the bond in full, she’d lose her personal tax allowance. Mrs C also said that there had been an ‘establishment charge’ on the bond of 0.2083% each month for the first five years which she did not know to be the case and didn’t think she would have gone ahead with the advice if she’d known at the time. MMM responded to Mrs C’s complaint. It said, due to the time elapsed, it held limited information on the sale of the bond. It said at the time the bond was established in 2008, the ISA allowance was £7,200 and the funds Mrs C wished to invest were £164,000. It said that although ISA limits have increased over the years, it would have taken approximately 17 years to fully invest these funds in an ISA. In conclusion MMM said it was unable to confirm Mrs C had been financially disadvantaged by being advised to invest in the investment bond. It said the bond’s value was now around

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£220,000 after tax-free withdrawals had been made. It went on to say Mrs C would have been restricted by the contribution limits of an ISA and also said the funds held in the bond would not be subject to means testing in the future should the money be needed for care, unlike an ISA. MMM also said the regulator, the Financial Conduct Authority, have rules regarding the time limits in which complaints have to be made. And it didn’t think Mrs C had made her complaint within those time limits. Mrs C didn’t agree with MMM’s conclusions and so she brought her complaint to our Service. Our investigator first considered the time limits highlighted by MMM. He explained that complaints needed to be made within six years of the event being complained about or three years from when the complainant became aware, or ought reasonably to have been aware, of a cause for complaint. In applying this rule our investigator said that although the sale of the bond had occurred more than six years before the complaint, he’d seen no evidence Mrs C was aware of a cause for complaint until a property fund she was invested in was suspended. That caused her to speak to a financial advisor in 2024 who explained there might have been other investment options that would have been open to her at the point of advice. Regarding the merits of Mrs C’s complaint, our investigator didn’t think the advice given in 2008 to invest in a bond was unsuitable. He said Mrs C was able to withdraw income from the bond when required and he didn’t think it was invested in unsuitable funds. Our investigator also said it would have taken 17 years to invest all of the funds in an ISA due to the allowance restrictions, but the bond allowed the funds to be invested in a tax-efficient environment immediately. Our investigator’s opinion on the complaint wasn’t accepted and so, the complaint has been passed to me for a decision. I gave Mrs C and MMM my decision on our jurisdiction to consider this complaint and a provisional decision on its merits. I explained that I was satisfied that Mrs C had made her complaint about the sale of the investment bond within the time limits allowed by the regulator. I went on to say that I didn’t think the advice to invest in the investment bond was unsuitable. I’ve included a copy of my findings on the merits of this case below. My provisional decision In my provisional decision I said: I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. When considering what is fair and reasonable, I take into account relevant laws and regulations as well as the regulator’s rules, guidance and standards. Where appropriate I also consider what was good industry practice at the time of the advice. The bond was taken out in 2008 which is now nearly 20 years ago. So, it’s not surprising that there isn’t a full record of what happened at the time. Where evidence is incomplete, inconclusive or contradictory, I reach my conclusions on the balance of probabilities – that is,

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what I think is more likely than not to have happened based on the available evidence and the wider surrounding circumstances. Mrs C has explained that she sought advice from MMM in 2008 following a divorce. She held a substantial amount of funds at that time, around £164,000, that she sought advice on. The rules MMM had to follow in 2008 around assessing the suitability of a product said that firms needed to take reasonable steps to ensure its recommendation was suitable. To do that it needed to obtain the necessary information from its client as to their knowledge and experience relating to the investment, financial situation and investment objectives. As there is no documentary evidence from the time of the sale, it’s difficult for me to assess whether MMM took the steps listed above. But I’ve considered whether it was likely that someone in Mrs C’s position in 2008 would benefit from investing in this type of policy and it was likely to be suitable to her needs. In my opinion, an investment bond is an appropriate tax efficient wrapper for someone who requires long-term capital growth coupled with the ability to take a tax-efficient income during the term if required. Bonds typically don’t have annual or lifetime investment limits unlike ISAs which Mrs C suggests should have been considered instead. Due to the lack of evidence I can’t say whether MMM considered investing in an ISA and ruled it out, or if it wasn’t considered at all. But I know that the annual ISA allowance in 2008 had risen to £7,200 having been set at £7,000 a year since ISAs were introduced in 1999. And MMM wouldn’t have known at that time that the allowance would increase in later years. On that basis, at the time it would have appeared likely to take 23 years to invest the full £164,000 into an ISA. So I can see why, if investing in an ISA was considered, it might have been discounted. In that scenario, Mrs C would have had to still do something with the vast majority of her funds. But even if investing in an ISA alongside another arrangement was a viable alternative to the bond, that doesn’t automatically mean the recommended bond was unsuitable. I have to consider whether the advice that was actually given was suitable for Mrs C. In one of her submissions to our Service Mrs C said “All I really wanted was capital growth, a long-term income, and not too much investment risk”. Mrs C supplied a letter from MMM dated 4 September 2009. It explained that Mrs C’s investments had been placed into the Canada Life Money Fund in 2008 during a ‘very volatile period of investment’. At that time, MMM had reviewed things and recommended switching into a Multi-asset protection fund (40%), Corporate bond fund (40%) and Money Fund (40%). The literature explained that the protection fund offered a level of capital protection and the corporate bonds were either guaranteed or underwritten by Government and Corporation. The evidence here suggests that MMM hadn’t taken too much risk with Mrs C’s investments, investing in a money fund during the financial crisis of late 2008, and gradually increasing that risk when appropriate to do so. In her complaint Mrs C commented that she’d needed to take income withdrawals from her bond. Which I can see she did in 2011 and from 2022 onwards. But the bond allowed for income withdrawals to be taken in a tax efficient manner. And the level of withdrawals Mrs C made fell into the 5% allowance (which could be rolled up from previous unused years). So, Mrs C has used the bond for its intended purpose. I also note that it’s been nearly 18 years since the bond was established and at no point has Mrs C surrendered large amounts of it. The funds have mainly been left invested over the

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long-term. Which again suggest to me that the bond was being used by Mrs C for its intended purpose as a long-term investment vehicle. Mrs C has suggested that a bond like this isn’t suitable for a basic rate taxpayer. But I disagree. An onshore investment bond is tax-efficient and can remain so even for a basic rate taxpayer who may not have to pay any additional tax because the 20% tax rate is deemed to have already been paid on any gains. Mrs C has also said it was only recently she found out there was an establishment charge applied by Canada Life for the first five years of the bond. I can’t say for certain whether the charge was discussed with Mrs C prior to her agreeing to invest in the bond. But the advice happened nearly 18 years ago and memories fade, so while Mrs C can’t remember the charge being discussed, that isn’t surprising. Charges like the establishment charge were required to be disclosed by both MMM and Canada Life. Even with the absence of any evidence I think it’s likely the charges were disclosed as part of both firms’ regulatory requirements. But even if they weren’t, Mrs C was seeking to do something with the funds she held. And any solution put forward was likely to come at a cost to Mrs C. So, I‘m not persuaded having to pay an establishment charge would have likely put her off the product recommended to her by her adviser. If Mrs C’s objectives in 2008 were to achieve capital growth at a suitable level of risk and a long-term income as she suggests, then for the reason’s I’ve given I think the recommended onshore investment bond would have met her objectives. And I haven’t seen any persuasive evidence to show that, in my opinion, the bond was unsuitable and was therefore mis-sold. The responses to my provisional decision Mrs C responded to my provisional decision. In summary she said: • She doesn’t agree that an onshore investment bond is a tax-efficient wrapper for a basic rate taxpayer. She said a product which suffers ongoing internal taxation can’t reasonably be described as tax-efficient when compared to ISAs or other mainstream alternatives. • The bond doesn’t become tax-free in the same way an ISA is always tax-free. If she encashes it, they’ll be a chargeable event causing her to lose her personal allowance. • She didn’t need regular income but required occasional lump-sum withdrawals. And the withdrawals she made from the bond were just a withdrawal of her original capital. She says an ISA would have had far better long-term tax outcomes. • The alternative to the bond wasn’t an ISA alone, the remaining funds could have been invested in collective investments with gains managed over time. The fact that the funds couldn’t go into an ISA immediately didn’t make the bond with its internal taxation suitable. • Where information is missing from 2008 it can’t be assumed that the charges and alternatives were discussed. What can be assessed is the suitability of the recommended product. • In conclusion she didn’t think the investment bond was a suitable product for a lifelong basic-rate taxpayer with no trust planning needs. And the tax advantages compared with ISA’s and other mainstream alternatives like Unit Trusts have been understated. MMM didn’t provide any further submissions or comments for my consideration.

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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. I’ve also re-considered the findings I reached in my provisional decision. Having done so, my decision remains the same. I’ll explain why. In response to my provisional decision, Mrs C sent a detailed submission for my consideration. I’ve carefully considered all of the arguments she’s raised. But many of the points raised have already been addressed in my provisional decision. So, my decision will focus on those points which I think are materially relevant to this complaint. I don’t intend on repeating at any length, the findings I already made in my provisional decision which forms part of this final decision. I appreciate Mrs C’s strength of feeling that she feels the investment bond cannot be considered tax efficient. But I disagree. I say that because the underlying fund can be switched and withdrawals made without triggering capital gains tax. Any capital gains or income received is taxed at source and paid for by the provider – so there might not be any further tax due on encashment. Investors can also withdraw up to 5% on their initial investment each year and defer any tax liability. I know Mrs C feels strongly that by now, she could have had the majority, or all of her funds in an ISA with no tax liability. However for the reasons I’ve explained in my provisional decision, the majority of her funds would have sat outside of the tax-free ISA wrapper for many years – and would have been subject to taxation. There might have been alternatives to the investment bond, such as investing in an ISA alongside a Unit Trust or General Investment account – which themselves would have had different, but not necessarily better, tax consequences – but my role is to consider whether the advice that was given was itself suitable. And while I’d expect an adviser to consider the tax consequences as part of assessing the suitability of any piece of advice, it isn’t the sole consideration and having to pay tax isn’t, in itself, likely to make a product unsuitable. It is difficult to know what was or wasn’t discussed at the time of the advice as there’s no documentary evidence from the time. But its Mrs C’s testimony that in 2008, she had a large lump sum to invest and wanted capital growth over the long term. And while she didn’t need a regular income, she might have needed to withdraw lump sums. I appreciate Mrs C disagrees, but I think an investment bond met her objectives at the time. Mrs C says we can’t assume, due to the lack of evidence, that the charges were discussed. And I agree with her statement. But in the absence of evidence I’ve considered what I think would most likely have happened. Even if the establishment charge wasn’t specifically discussed with Mrs C, that in itself wouldn’t have made the investment unsuitable. I’d need to be satisfied, on balance, Mrs C wouldn’t have invested if she knew there was an establishment charge, which she says she wasn’t aware of. In doing so I consider that it was Mrs C’s objective to invest a lump sum, and I’ve seen no evidence she had a pre-existing arrangement that could facilitate the investment. So, there would likely have been costs involved when recommending the opening of the investment bond or any other alternative product. And I’ve seen no evidence that Mrs C wasn’t prepared

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to accept some cost in setting up an arrangement to accept the lump sum. I therefore think it’s likely she would have accepted her adviser’s recommendation, having sought professional advice on what to do, even if the establishment fee was disclosed. Having reconsidered all the available evidence and arguments. I’m satisfied the advice to invest in an investment bond was suitable. My final decision My final decision is, I don’t uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mrs C to accept or reject my decision before 17 April 2026. Timothy Wilkes Ombudsman

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