In general, it is important to note that an investment is not unsuitable simply because it performs badly. Investments by their very nature carry with them an element of risk, which means they may well fall in value or fail altogether. This means that just because an investment has fallen in value does not mean that there was any deficiency in the advice given, as the specific outcome of an investment cannot be known in advance. There are some reasons why an investment may not have been suitable for a client, namely:
Mismatched risk exposure - if the investment was riskier than the client was prepared to take, then the advice can be considered unsuitable even if the investment has actually performed well. In that case, the remedy would be to switch into a more appropriate investment now, taking the additional gain as effectively a bonus. Insufficient information - if the investment was not fully explained to the client, they cannot have made an informed decision to proceed. This usually means that the client was unaware of the charges or the underlying investment strategy. It may be that the adviser was themselves unaware, but their duty of care to the client means that they should only advise on assets they have fully investigated. Incorrect permissions - if the adviser was not authorised to intermediate on the specific assets in question, then their advice was unsuitable. Non-mainstream investments marketed inappropriately. Some investments are subject to additional restrictions over their marketing and advice, usually requiring a client to be either deemed sophisticated or high net worth. If the investment required such a categorisation but the client was not recorded as such, the advice may well be unsuitable.