Hurst Financial Consultancy Limited · DRN-6100967

The complaint Mrs Y complains Hurst Financial Consultancy Limited (‘Hurst’) gave her advice that was unsuitable because it caused her to be charged more fees than necessary. Mrs Y was initially assisted in this complaint by her current financial adviser, but for simplicity I’ll refer to all actions and comments as being those of Mrs Y. What happened Mrs Y knew of Hurst through her husband Mr Y’s workplace pension. Mr Y first approached Hurst in 2013 as he was beginning to think about retirement. By early 2014, when Mrs Y was about age 58 and Mr Y about age 60, they had both planned to retire later that year and so they sought advice from Hurst. Hurst gathered information about Mr Y and Mrs Y’s circumstances, including from their existing pension providers. Hurst’s June 2014 report recorded that: • They both had a ‘cautious to moderate’, i.e. 4 out of 10. attitude to risk (‘ATR’). • They’d both decided to retire early following a recent inheritance. They wanted long- term growth and income for their pensions. • Their non-pension assets had a total value of £160,000 and they owned their own home outright. Mr Y had two defined contribution (‘DC’) pensions worth a total of £160,736 and Mrs Y had a DC pension worth £97,108. The performance of these pensions had been mixed and the overall returns had been reduced by Mrs Y’s pension, which also did not allow fund switches. They were not receiving any advice on two of these pensions or on their wider financial planning. And given the sums involved, they were concerned about that. • They were happy to draw down capital to provide an income and then consider their options in April 2015. • Of the options explored, Hurst recommended they transfer these three pensions into new self-invested personal pensions (‘SIPPs’) with pension provider ‘Firm J’ and to have their SIPP monies managed by discretionary fund manager ‘DFM B’ in line with their ATR. The reasons given were that this would allow their pension monies to be professionally managed, provide the flexibility to choose which pensions to use for income and tax free cash (‘TFC’), and provide the option of drawing £10,000 from each pension without being subject to tax. • This would come at an increase in cost of 1.3% per annum. And Hurst’s fee for this advice would be 2% of the transferred amount. • Hurst enclosed, amongst other documents, an illustration showing what effect the fees would have on their pensions over time – this set out Firm J’s fees, including its £50 initial transfer in charge, £50 investment manager account set up charge, its £195 annual administration charge (‘AMC’), and £150 transfer out fee. It also set out an assumed average cost for DFM B as 1.5% per annum. • Hurst also enclosed a ‘portfolio review’ report from DFM B which said it thought Mr Y and Mrs Y’s portfolio, viewed as a whole, could be structured more efficiently in terms of asset allocation and individual investment, and portfolio diversity could be

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improved by including further asset classes. Hurst reiterated this recommendation in the August 2014 joint suitability report it prepared for Mrs Y and Mr Y, saying “Having discussed your investment objectives, it was felt that your funds should be invested in a different manner, more in keeping with your long term aims. We have researched the funds available from your existing provider and they do not appear to have a selection of funds suitable for your current requirements, we therefore recommend the transfer of benefits.” Mrs Y and Mr Y accepted this advice. The SIPP application form, in which Mrs Y signed her acceptance, set out that Mrs Y would pay Hurst fees of 2% for the pension transfer and then an ongoing charge of 1%. Mrs Y and Mr Y’s SIPPs were opened and the pension monies transferred. In October 2014, DFM B wrote to them saying their accounts had been opened, and that there was no initial fee but it would charge them an AMC of 0.65% for managing their investments. Hurst provided Mrs Y and Mr Y with ongoing advice over the years. Of relevance to this complaint is its advice to transfer the existing stocks and shares ISAs they each held plus a cash lump sum into respective stocks and shares New Individual Savings Accounts (‘NISAs’) – the term at that time for the revised and more flexible ISA introduced in July 2014 – to again be managed by DFM B in line with their continued ATR of ‘cautious to moderate’. Hurst’s December 2014 joint suitability report set out its recommendation to transfer these ISAs. It said their objective was capital growth, and this recommendation would give them access to a significantly larger fund range and to professional advice. And that while it would create a new layer of cost, Mrs Y and Mr Y agreed this was warranted in light of the extra services they wished to benefit from. It again set out that Hurst’s initial advice fee for this would be 2% and its ongoing advice fee 1% per annum. And that DFM B’s fees were an annual management fee of 0.65% plus VAT, dealing costs of between 0.15% and 1%, and an administration charge of £15 per transaction. The other advice of relevance to this complaint is the advice Hurst jointly gave Mrs Y and Mr Y in May 2015 to transfer the cash ISAs they each held into NISAs, again to be managed by DFM B in line with their continuing ‘cautious to moderate’ ATR. The reasons given in the suitability report Hurst prepared for them were much the same as those given in the December 2014 suitability report; and it again included that while it would create a new layer of cost, Mrs Y and Mr Y agreed this was warranted in light of the extra services they wished to benefit from. Also, it again set out that Hurst would charge an initial advice fee of 2% for this, plus an ongoing advice fee of 1% per annum. Mrs Y and Mr Y were in communication with Hurst in 2023 about various matters. As part of this, the email they sent Hurst on 27 February 2023 said “Also, we keep reading about fees, all financial papers seem to agree that if you’re paying 2%, you’re paying too much. We are paying more aren’t we?” And in response to a query from Mrs Y about possibly moving away from DFM B, in April 2023 Hurst told her it had been considering moving her and Mr Y away from DFM B for some time because they’d withdrawn funds from their pensions and reduced the value of their holdings, which reduced the effectiveness of using a DFM. But that moving away from the DFM would require assets to be sold, with dealing fees in the region of 1%, but after discussions with DFM B it would be possible to move without this cost. In June 2023 Mrs Y and Mr Y moved away from Hurst, Firm J and DFM B, and instructed a new adviser because of what they saw to be high fees and a complicated arrangement.

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In October 2023 Mrs Y and Mr Y jointly complained to Hurst that: • Its initial advice fee of 2% had been too high. And it hadn’t told them about the fees charged or provided illustrations to show the effect of fees over time. • The advice to invest in SIPP and NISA arrangements caused unnecessary complexity and costs. Its suitability reports hadn’t been tailored to their needs. And the investments were unduly complicated and difficult to understand. • They were told there wouldn’t be fees for withdrawals, yet they were charged transaction fees for disinvesting. • Their individual amounts of capital were relatively small and so weren’t suitable for SIPP and ISA arrangements, or for a DFM service. • When they were unhappy with the performance of the funds, they were told they could move to another provider. But this never happened and they weren’t given any proactive advice at a time of high market volatility. So, the fees were not justified. As they’d not yet had any response, Mrs Y and Mr Y referred their complaint to the Financial Ombudsman Service in May 2024, adding that they thought Firm J and DFM B had also overcharged them, in addition to Hurst. Our Service decided to deal with Mrs Y and Mr Y’s complaints about Hurst separately. Hurst issued its final response letter in June 2024. It said it hadn’t received the complaint letter as it had been incorrectly addressed. But having now considered the complaint, it didn’t uphold it. One of our Investigator’s gave their view of Mrs Y’s complaint. He thought Hurst’s advice to transfer her pension and ISAs wasn’t unsuitable, that the costs were made clear to Mrs Y, and Hurst’s initial advice fee wasn’t out of step with what other firms were charging. And he explained that if Mrs Y had a complaint about a specific transfer out charge being applied, she should direct that to DFM B. However, our Investigator thought the advice to use a DFM was not in Mrs Y’s best interest, as he thought Hurst itself could have advised Mrs Y about what to invest in; she’d not needed a wide range of funds and something like a lower cost model portfolio (rather than a higher cost bespoke arrangement) would have been more suitable for her given her ATR meant her investment wasn’t likely to grow sufficiently more than the 1.5% per annum DFM B was charging. So our Investigator said Hurst should carry out a redress calculation and compensate Mrs Y if this showed a financial loss, and that it should also pay her a further £100 as compensation for the distress it had caused her. Mrs Y acknowledged the Investigator’s view, and didn’t provide any further comments or evidence for consideration. Hurst disagreed with the Investigator. It thought Mrs Y had complained too late under the time limit rules because at the time of the advice she was given comprehensive information about all the fees involved. And regarding the merits of her complaint, Hurst’s new relevant points were broadly that: • Mrs Y and Mr Y’s pensions and ISAs were managed as a single household portfolio under a combined DFM mandate. DFM B treated their assets as one portfolio for the purposes of strategic asset allocation, rebalancing and risk oversight. • The documents it provided to them in 2014 made clear DFM B’s discretionary management fee of 0.65% plus VAT (0.78%), the underlying fund costs and dealing charges, and Hurst’s 1% ongoing advice fee.

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• The 1.5% DFM figure within illustrations was purely for standardised comparative purposes. The balance of this figure comprised underlying fund AMCs and dealing costs, which would’ve applied under any investment solution available at that time and were in fact lower than the underlying costs of Mr Y’s existing arrangements and lower than Hurst’s contemporaneous model portfolios, due to the use of institutional share classes. Had standard retail funds been used, underlying AMCs would mostly have been higher, not lower, than those under DFM B. And passive or model portfolios were not mainstream until 2018/2019. • The DFM solution wasn’t higher cost when compared with standard industry solutions available at that time. The prevailing market conditions in 2014 meant the total cost of the DFM arrangement was broadly comparable to, and in some cases slightly lower than, alternative advised solutions, including stakeholder pensions and adviser-led fund portfolios. So the evidence didn’t support that Hurst’s recommendation to use DFM B introduced unnecessary costs, and therefore no redress was required. • Hurst’s 1% ongoing advice fee didn’t just cover the monitoring of DFM B’s continued suitability for Mrs Y and Mr Y, but also wide-ranging financial planning services and ongoing client support. • The stocks and shares ISA they transferred in December 2014 had an AMC of 1.74%, so they’d moved away from a comparative high cost yet unadvised arrangement. • Lower cost alternatives to a DFM may have existed, but COBS 9 didn’t require Hurst to recommend the cheapest available option but rather to recommend what was suitable for the client. And the cheaper option wasn’t always best for the client. Mrs Y and Mr Y’s ATR didn’t mean a DFM was unsuitable for them; DFM’s routinely managed across the full risk spectrum, including low to medium ATRs. • Moving away from DFM B would ordinarily have required asset sales and dealing costs of around 1%, but DFM B had confirmed a transition could be made without incurring those charges. But Mrs Y and Mr Y then decided to move away from DFM B and to appoint a new financial adviser. Our Investigator explained to both parties that he thought Mrs Y’s complaint had been brought in time, and he ultimately didn’t change his view of Mrs Y’s complaint. Therefore, it was passed to me for a decision. I issued a provisional decision in which I explained why I thought Mrs Y’s complaint had been brought in time but shouldn’t be upheld. I said the only matter that remained in dispute was whether Hurst’s advice to recommend a DFM, in particular DFM B, was suitable for Mrs Y, and I explained why I thought it had been suitable for her. Hurst accepted the provisional decision and had nothing to add. Mrs Y was very disappointed with the provisional decision but didn’t provide any further comments or evidence for me to consider. As both parties have had the opportunity to respond to the provisional decision, I’m now in a position to make my decision. What I’ve decided – and why I’d like to start by making clear that in this decision I’m only addressing Mrs Y’s complaint against Hurst, though I have needed to make general reference to Mr Y in setting out the background. But Mr Y’s complaint against Hurst, although very similar, is being dealt with separately by our Service.

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In their responses to the provisional decision, neither party have provided any further comments or evidence. So, while I have reconsidered all the comments and evidence I do have regarding this complaint, I see no reason to depart from the reasoning and conclusions I set out in the provisional decision. And so I’ll largely repeat them here. Preliminary point – jurisdiction Hurst now argues that our Service can’t consider the merits of Mrs Y’s complaint, as it’s been brought too late under the six-year and three-year time limits. The Financial Ombudsman Service isn’t free to consider every complaint brought to us. Our ability to consider complaints is set out in Chapter 2 (DISP 2) of the FCA’s Handbook of Rules and Guidance. DISP 2.8.2R sets out the relevant time limit rules; it says that, unless the business consents: The Ombudsman cannot consider a complaint if the complainant refers it to the Financial Ombudsman Service: (2) more than: (a) six years after the event complained of; or (if later) (b) three years from the date on which the complainant became aware (or ought reasonably to have become aware) that he had cause for complaint; unless the complainant referred the complaint to the respondent or the Ombudsman within that period and has a written acknowledgement or some other record of the complaint having been received; unless: (3) in the view of the Ombudsman, the failure to comply with the time limits…was as a result of exceptional circumstances; Hurst gave Mrs Y the advice that she says led her into an arrangement that was unnecessarily expensive for her in August 2014 (pension transfer), December 2014 (first ISA transfer with lump sum) and May 2015 (second ISA transfer). This means the events complained of took place more than six years before Mrs Y complained to Hurst about them in October 2023. So, her complaint has been brought outside the six-year part of the rule. Therefore, I need to consider whether her complaint has been brought within the three-year part of the rule. Under this, I need to consider not only when Mrs Y did become aware she had this cause for complaint about Hurst, but also when she ought reasonably to have become aware of it. Hurst says Mrs Y ought reasonably to have been aware of her cause for complaint when she was given the advice, because that’s when Hurst gave her comprehensive information about all the fees involved in what it was recommending. I accept Mrs Y was provided with this information. But it does not automatically follow that she ought to have thought there was something wrong with the fees. And I’ve not seen anything to suggest Mrs Y had any relevant skills or experience such that she ought to have known that some or all of these fees might be unreasonably high or unnecessary for her in her circumstances. So, I don’t think that simply being provided with fee information at the time of the advice meant Mrs Y ought reasonably to have been aware she had cause for complaint about either the advice or the fees involved in accepting that advice.

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I’ve thought about whether there was anything else that ought to have made Mrs Y aware of her cause for complaint, but I’ve not seen that there is. I’ve not been provided with any evidence to suggest she had any information that ought reasonably to have made her aware she had cause for complaint about the suitability of the advice or the fees accepting it would lead to more than three years before she did complain to Hurst about these things. Instead, the evidence is that Mrs Y only had such information in early 2023. I say that because the email Mrs Y and Mr Y sent to Hurst on 27 February 2023 said “Also, we keep reading about fees, all financial papers seem to agree that if you’re paying 2%, you’re paying too much. We are paying more aren’t we?” And it appears that Mrs Y and Mr Y’s new adviser, a financial professional with experience and knowledge of the wider market, then told Mrs Y she might be paying more than was necessary. And Mrs Y complained within three years of early 2023. Therefore, I still think this complaint has been brought in time under the three-year part of the rules and so is one our Service can consider the merits of. So, I’ve moved on to consider its merits, which I’ll now turn to. The merits of Mrs Y’s complaint I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. I’d like to start by acknowledging that I’ve been provided with a great deal of comments and evidence in relation to this complaint. And I’d like to again reassure both parties that I’ve carefully reconsidered everything provided. But my decision, either in the background or in my findings, won’t set out or address every point made or every piece of evidence. That’s deliberate; while I mean no discourtesy, my decision will instead only set out and address what I see to be relevant in reaching a fair and reasonable outcome to this complaint against Hurst. In considering Mrs Y’s complaint, I’ve also taken into account relevant law and regulations, regulator’s rules, guidance and standards and codes of practice, and what I consider to have been good industry practice at the time. This includes the Principles for Businesses (‘PRIN’) and the Conduct of Business Sourcebook (‘COBS’). In his view of Mrs Y’s complaint, our Investigator explained to both parties why he thought Hurst’s advice to transfer her pension and ISAs wasn’t unsuitable, that the costs were made clear to Mrs Y, and Hurst’s initial advice fee wasn’t out of step with what other firms were charging. He also explained that if Mrs Y had a complaint about a specific transfer out charge being applied, she should direct that to DFM B. And I note neither party disputed what the Investigator said here. So these points no longer seem to be in dispute. But for completeness, I have myself independently considered all the evidence provided in this complaint, and on these particular points I have reached the same conclusions as the Investigator and for broadly the same reasons. So the only matter that appears to remain in dispute here is whether Hurst’s advice to recommend a DFM, in particular DFM B, was suitable for Mrs Y. So that is what I’ve focused my decision on. Mrs Y says the value of her individual capital didn’t warrant a DFM arrangement and it led to unnecessary costs for her Whereas Hurst says its recommendations to use a DFM was suitable for Mrs Y, because she and her assets were viewed as part of a household along

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with Mr Y and his assets. And together, they were significant enough to warrant a DFM and the benefit of this was worth the cost – which it says were in any case not excessive compared to the alternatives. While I accept that Mrs Y and Mr Y each had their own individual pension and ISA accounts, I’m not persuaded it was unfair or unreasonable for Hurst to view their assets as one ‘pot’. I say that because they were married, had both chosen to retire at the same time and were intending to use their combined assets as a source of retirement income for both of them. Further, theirs was a significant pot. When Hurst first advised them to transfer their pension in August 2014, the value of their pensions and non-pension assets totalled about £417,844. And this did not include the equity in their home or any state pension I think Mrs Y and/or Mr Y would likely also have received in time. As I say, I’ve not seen that Mrs Y had any significant or relevant experience or knowledge of pensions and investment, or that Mr Y had any such that he could have shared with her. Indeed, it appears that Mr Y and Mrs Y sought out Hurst because they wanted retirement advice, and that given the sums involved, they were concerned they were not receiving any advice on two of their pensions or on their wider financial planning. And Hurst recorded that Mrs Y’s objective was to obtain long-term capital growth and income. I think Mrs Y would have understood that she had the option of leaving her pension, ISAs and cash where they were, because Hurst’s respective reports refer to this option and/or other options. However, the reports explained Hurst had discounted other options, essentially because transferring her pension, ISAs and some cash and having those monies managed by DFM B was suitable for her as it would allow her funds to be proactively managed in a greater range of investments, as Mrs Y wanted. And that while this would cost more, Mrs Y was prepared to pay this in exchange for the extra services she would receive. And I think it was made clear to Mrs Y that she was being recommended to switch to a more expensive arrangement for her pension and ISAs, because Hurst’s reports made this clear. However, for the increased cost Mrs Y would be able to access a wider range of investments and receive the services of DFM B, and the evidence is that this particularly appealed to Mrs Y given that she wanted to ensure her pension funds were managed and accessed in way that would provide her with sustainable income. So, I think Mrs Y wanted to access DFM B’s services and she ultimately agreed to have them manage her SIPP and NISA investments. For clarity, I am not saying that Hurst’s role here was to simply arrange what Mrs Y wanted. Hurst’s role was to act in Mrs Y’s best interests and provide her with a suitable recommendation. But Hurst was not required to provide Mrs Y with the most suitable recommendation, or the recommendation that was lowest cost; only a recommendation that was suitable for Mrs Y. And overall, I’m not persuaded that Hurst’s recommendations to use DFM B to manage her pension and ISA investments was unsuitable for Mrs Y in her particular circumstances. I say this because the recommendations to use DFM B gave Mrs Y the comfort of knowing these monies were being actively and professionally managed, and also gave her a greater investment choice through which to provide her with long-term growth from which she could take a sustainable income. I appreciate the recommended new arrangement would overall cost Mrs Y more. But I think Hurst made this clear to her at the times of its advice, so I’m satisfied Mrs Y proceeded knowing the costs. Further, the evidence is that Hurst kept the suitability of the DFM B arrangement for Mrs Y under review, given the content of Hurst’s April 2023 email to Mrs Y about her and Mr Y moving away from DFM B. So while I know this is very disappointing for Mrs Y, I’m not upholding her complaint.

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My final decision For the reasons set out above, my decision is that I don’t uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mrs Y to accept or reject my decision before 25 March 2026. Ailsa Wiltshire Ombudsman

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