Bank's advice matched customer's risk profile

Categories:
Investing
Summary:
Tani wanted to invest $190,000 and earn $12,000 a year from it – a return of 6.3 per cent. The bank assessed Tani as being prepared to take a little more risk than a conservative investor and set up a portfolio containing various investments managed by different fund managers.

Over five years, one particular fund’s value declined sharply. Tani said he had been inappropriately advised to invest in that fund, and the problem was compounded by bank advice not to withdraw from it two years earlier. The bank denied both allegations.

Our investigation

We examined the bank’s advice and decided its recommendation was appropriate in light of his risk profile. We also looked into the bank’s advice not to withdraw from the fund two years earlier and were satisfied the bank’s review process was sound, and that it had given appropriate advice based on information available.

Banks are not responsible for investment losses simply because a recommended investment’s value declines. Whether an investment is appropriate for a certain customer will depend on the information available to a bank, and the customer’s risk profile. A customer who knowingly assumes the risk of an investment cannot require the bank to guarantee the value of an investment.

Outcome

We did not uphold Tani’s complaint.

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