Hargreaves Lansdown Asset Management Limited · DRN-5973917

The complaint Mr G complains that Hargreaves Lansdown Asset Management Limited (HLAM) did not complete his application to switch funds in his pension account in accordance with its published process. He experienced financial loss, distress and inconvenience as a result. What happened Mr G has an income drawdown account with HLAM. He made a request using HLAM’s online system to switch funds in his pension account on 23 June 2025. The sale price and the purchase price was £16,000. He says the process described on the online system indicated that switching comprised a direct transfer of an investment in one fund to a corresponding investment in another fund. Mr G says HLAM informed him on 25 June 2025 that there were insufficient funds in his income drawdown account to pay him his monthly drawdown amount. Mr G says he was alarmed by this information since he had over £15,000 cash in his drawdown account. He thought that his account may have been hacked. He contacted HLAM. HLAM informed Mr G that its system was designed to use any available cash to facilitate the switch – irrespective of whether there was any upcoming income payment obligation. It said that its trading rules stipulated that it had to first use any existing settled cash to carry out the “buy” before it used unsettled proceeds from a previous sale. HLAM said it always used settled cash before any unsettled cash when placing a trade. Mr G complained to HLAM. By way of summary, he said: • According to the online screens which he’d checked, the available cash balance on his drawdown account had not fallen below £15,785 – more than enough to meet his monthly drawdown amount of just under £300. • How had HLAM funded the purchase element of the switch from the income drawdown account - when the cash balance in Mr G’s income drawdown account was less than the purchase price? • The process HLAM had followed was not in line with its own published process. The actual process was materially different. Mr G said this breached Financial Conduct Authority (FCA) rules including the Consumer Duty Principle which he said required HLAM to address systemic issues that were known to likely cause foreseeable harm to a retail consumer. Mr G also thought HLAM’s process breached the Digital Markets, Competition and Consumers Act 2024 (DMCC) because it had “omitted material information” that was likely to cause a different customer decision prior to the point of sale. He thought HLAM ought to have taken steps to inform him that his entire cash position would be wiped before inviting him to continue with the switch. HLAM investigated his complaint. By way of summary, it said: • It did not require Mr G to wait until the settlement date in order to trade internally. The settlement date was the date at which HLAM received the funds from a trade. The sale part of the switch had increased Mr G’s cash balance by £16,000 – but that

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didn’t settle until 26 June. The purchase part of the switch used the full settled balance within the account before using part of the unsettled balance. • The monthly income drawdown payroll was run on 25 June 2025 – but at that date the settled cash balance in Mr G’s account was zero, • HLAM’s online system provided details about the trade date and the settlement date within the transaction history. • HLAM always looked to use settled cash before any unsettled cash – including when a switching instruction within the income drawdown account was placed. • It took care to ensure that its processes were compliant with Consumer Duty. It referred to its Terms and Conditions, Key Features and Guide to Drawdown documents. Mr G did not agree. He referred his complaint to our service. He reiterated that he believed HLAM was in breach of regulations and legislative provisions. He said he wanted a formal apology; a commitment from HLAM that it would comply with FCA guidance and the DMCC 2024 within three months; and £5,000 compensation for the anguish he’d been caused. Our investigator looked into Mr G’s complaint. She said HLAM had acted in line with the terms and conditions for the income drawdown account. However, she thought HLAM could have done more to make its process clear. She explained that the FCA’s Consumer Duty principle required HLAM to provide the information Mr G needed before placing his order “at the right time” and it was required to present the information in a way that Mr G could understand. Our investigator explained that our service was not the regulator – that was the FCA and Mr G could contact it if he believed HLAM had breached its Rules. Our investigator considered the distress and inconvenience Mr G had experienced because of what happened. She said our role was not to fine or punish a business. So, in line with our guidelines she thought HLAM should pay Mr G £200 for distress and inconvenience. Mr G did not agree. He referred again to the DMCC 2024. He also reiterated there was not enough cleared cash in his income drawdown account to have funded the purchase part of his switch instruction. Our investigator considered what Mr G said but she did not change her view about how the complaint should be resolved. Because Mr G disagreed, the complaint has been passed to me to 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. The Terms and Conditions I’ve looked at the Terms and Conditions which applied to Mr G’s account. These are set out in various documents. HLAM has referred to the following provisions: Terms and Conditions – Clause E states that an income payment will not be made from the drawdown account if the settled cash amount is less than £50. Drawdown Key Features leaflet “Your commitment” states that the consumer will ensure there is sufficient settled cash in the account to meet the income payments as they fall due.

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This leaflet also includes the following wording: “Why should I be aware of fund switching and withdrawals?” “If you give an investment instruction to sell and reinvest the proceeds at the same time (e.g. a fund switch) in your drawdown account, we may use the cash available at the time to cover the cost of the reinvestment while the sale is being processed. To avoid this restricting any pending income withdrawal, it might be wise to wait until income is received before giving this kind of investment instruction.” Mr G says that he may have been given a copy of the Drawdown Key Features leaflet when he opened his account – but he says that was in 2012. He also says the leaflet is very difficult to locate on HLAM’s website and is only available when opening an account. Managing Cash in Drawdown leaflet This leaflet sets out the things that a consumer who plans to take income from their drawdown account should be aware of. First a consumer should make sure there is enough available cash in the drawdown account to cover the withdrawal. Second, available cash will always be used to pay outstanding fees. Beneath these two statements, which Mr G points out are in bold text, the following paragraph appears in standard text: “Beware of fund switching when you’re due an income payment. If you give an instruction to sell an investment and reinvest the proceeds at the same time (e.g. a fund switch) and you’re expecting a drawdown income payment, you may get less than you expect. This is because we use any available cash to cover the cost of the reinvestment while the sale is being processed. To avoid this you might want to wait until you receive your income payment before giving an investment instruction of this kind.” Mr G says that whilst he has been able to locate a copy of this document now when he logs into his online accounts, it is not a document that HLAM has ever brought to his attention. He also points out that he wouldn’t have felt the need to read the document since he had specifically funded his cash account to fund his income withdrawals for a lengthy period of time. Mr G also refers to the specific guidance which appears on the online screens when a consumer wants to switch funds. He points out that there is no link to the Key Features Leaflet or the Managing Cash in Drawdown leaflet. And he says there is no reference on the online switching screen to what he should be aware of. I’ll comment further on the points Mr G has made concerning the Terms and Conditions below. Placing the switch instruction I’ve looked at the information which appears on the online screen entitled “How to switch funds.” This is the information that is presented to a consumer at the point in time when they are placing a switch instruction. It includes the following: • “Switching allows you to sell some or all of a fund you currently hold and invest the money raised directly into another one.” • Before you start “you should fully research your chosen fund before you trade...” • How to switch includes details about the steps to follow including - how to

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login, select the fund the consumer wants to sell and the fund he wants to switch into. • Step 9 states: “Check the value or number of units you’re switching is correct. Read the Key Investor Information…” • Step 10 states “Select ‘Place a deal now’ to confirm.” Having considered the information on this screen I’ve not seen anything that refers to the Key Features document, the Managing Cash in Drawdown document, or anything which reminds a consumer about what he should be aware of if he has a drawdown account and is proposing to switch funds. I’ll comment further about that below. The Switch Process HLAM has explained that when a consumer places a switch instruction it looks firstly to use any cleared cash to fund the purchase. That’s in line with what it says in the Terms and Conditions – extracts from which I’ve set out above. And it’s also in line with the things it says a drawdown customer should be aware of when placing a switch instruction. So, I’m not persuaded, on balance, that HLAM has failed to follow the terms and conditions when it carried out the switch instruction. When reaching that view, I’ve thought carefully about the submissions made by both parties. The switch instruction comprised two parts – a sale of funds and a purchase of funds. The purchase was funded firstly by any available cash. In addition, HLAM has explained that it used some of the “unsettled cash” which had been generated by the “sale” to make up the additional funds required to pay the purchase price. That meant that although there was an unsettled cash balance in Mr G’s account on the day the payroll was run, HLAM was unable to make the income payment to him. The cash then settled on 26 June 2025. HLAM has also explained that information about the trading date and settlement date appears in the online transaction history which are available for Mr G to view in his online account. However, the crux of Mr G’s complaint is that the “warnings” which appear in the “Key Features” leaflet and the “Managing Cash in Drawdown” leaflet do not appear on the online screens which set out the steps that need to be followed to switch funds. He says this is “unfair” and it is contrary to various regulatory and legislative provisions. It is the case that when considering what is fair and reasonable in all the circumstances here, I have taken into account relevant law and regulations, regulator’s rules, guidance and standards, codes of practice and where appropriate what I consider to be good industry practice at the relevant time. Mr G has referred to various regulatory and legislative provisions in his submissions to our service – specifically the FCA’s Consumer Duty Principle and the provisions of the DMCC 2024. The FCA’s Consumer Duty Principle Principle 12 of the FCA’s Principles for Businesses (‘the Consumer Duty’) says a firm must act to deliver good outcomes for retail customers. The Consumer Duty applies to ‘open’ products and services from 31 July 2023, and to ‘closed’ products and services from 31 July 2024. One of the outcomes that the FCA has identified under its Consumer Duty Principle relates to consumer understanding. Consumers are expected to take responsibility for the decisions they make about products and services. To do this, businesses must give consumers the information they need at the right time and present it in a way they can understand – so they

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can make informed decisions. HLAM has referred to its terms and conditions which as I’ve stated above, did include details about matters consumers should be aware of when making a decision to switch funds. However, those statements were not repeated at the point in time when Mr G was making the decision to switch funds in his drawdown account. I’m satisfied on balance, it’s fair and reasonable to have expected HLAM to have drawn this information to Mr G’s attention during the online switching process. It was important to make him aware, at the time when he was making the switch, of the information that appeared in the Drawdown Key Features document and the Managing Cash in Drawdown leaflet. And doing so would have been in line with the Consumer Duty Principle relating to consumer understanding. But HLAM didn’t do that. Mr G has also referred to the DMCC 2024 and the provisions it contains about the requirement to provide consumers with the key information they need to make an informed transactional decision. He says that HLAM omitted to do this when he was carrying out the switching transaction. Ultimately whether there has been a breach of the provisions of the DMCC 2024 would be a matter for a civil court to determine. However, I’m satisfied that I don’t need to comment further about that legislation here – since I’ve already decided it’s fair and reasonable to have expected HLAM to have brought information about managing cash in drawdown to Mr G’s attention at the point in time when he was making the switch. That view seems to me to be entirely consistent with the points Mr G has made about the provisions in DMCC 2024. Having considered everything here, although I’m not persuaded HLAM followed a process which was different to what it described in its terms and conditions, I am satisfied, on balance it’s fair and reasonable to have expected it to have done more, during the online switching process itself, to repeat the information about managing cash in withdrawal to Mr G. Putting things right As our investigator said, our role is not to fine or punish a business when it makes errors or where, as here, we decide that it should have done more to bring important information to Mr G’s attention during the online switching process. We are not the regulator. The regulator is the Financial Conduct Authority. We look to see whether Mr G has suffered any financial loss as a result of what happened. In his complaint to our service, Mr G accepted that the financial impact on him was “quite modest” mainly because he was able to access his savings account. So, I don’t think it’s necessary for me to assess the financial impact as a separate head of damages. Rather, I have taken this into account when considering the amount of compensation which should be paid for the distress and inconvenience Mr G experienced here. Mr G says that he thinks compensation of £5,000 is fair. He’s explained that he was caused anguish when he was told there were insufficient funds in his cash account. He says HLAM’s attitude has been unhelpful and has been one of “Defend, deny and delay.” For that reason, he says he’s had to be persistent, and he’s expended a lot of time and effort trying to get the matter resolved. This has also affected his health. In subsequent correspondence Mr G said his request for a sum of £5,000 was designed to set a precedent that would make it economically prudent for HLAM to modify its behaviour. As I’ve stated above however, our role is not to fine or punish a business that makes an error. So, I won’t be making an award that seeks to do that.

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I’ve thought about what Mr G has said about the impact of what happened here. I’ve also considered our guidelines for awards for distress and inconvenience. I can appreciate that Mr G would have been alarmed when he was told there were insufficient funds in his account to make the monthly drawdown payment. However, he was in contact with HLAM as soon as he received its email and HLAM did explain to him what had happened. Its records state that it offered to process a manual payment for him if he needed his monthly payment before the next scheduled payment. It is also the case that the funds from the sale part of the switch transaction settled on 26 June 2025 – just a day after he’d received the email. Our investigator thought that HLAM should pay Mr G £200 by way of compensation for distress and inconvenience. Our guidelines say that an award of that amount might be suitable where there have been repeated small errors, or a larger mistake, requiring reasonable effort to sort out. We also think about the distress the business’s actions have caused. As I’ve mentioned above, Mr G did experience alarm when he thought someone may have hacked his account. But HLAM did provide him with enough information as soon as he contacted it to reassure him that that was not the case. So, having considered everything, including the fact that Mr G had to access his savings to cover the monthly payment, I’m satisfied that an award of £200 is fair and reasonable in all the circumstances that applied here. My final decision For the reasons set out above, I uphold this complaint about Hargreaves Lansdown Asset Management Limited. I now require it to take the following action to resolve this complaint: • Pay Mr G £200 for the distress and inconvenience he experienced as a result of what happened here. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr G to accept or reject my decision before 23 February 2026. Irene Martin Ombudsman

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