A BBC television programme, Panorama, reported on the issue of whether Britain banks have been mis-selling to customers, investment products that are geared towards making profits for the banks, rather than protecting the hard-earned life savings and retirement funds of the customers.

Mis Sold Financial Products

Those customers, in today’s economy, are confronted with the fact that interest rates offered on ordinary savings accounts are at a historic low, all while the value of their accumulated savings face dissipation from the impact of inflation.

The banks, in recent times, have seen the imposition of fines mounting to multi-million pound levels formis-selling of PPI and Mis sold mortgages, and the public has also been angered by large bonuses given to bankers, and by bank bailouts utilizing public funds. While the banks claim that they have rectified many of the problems that led to this situation, interviews with some bank customers indicate that the problems may well not be over.

Two such customers featured in the programme are Heather Adams and her husband Tony. Although they sought investment advice from different banks, both husband and wife saw their invested money essentially cut in half. This occurred, they insist, despite the fact that they stressed to their respective bankers that what they sought was the safety of their funds, rather than speculative investments.

Mrs. Adams, who worked in a post room, decided on early retirement from that job back in 2006. She asked bankers at Abbey National Bank for advice as to how she could safely invest her 11,000 pound pension funds to preserve her nest egg. Half a year later, her funds had been cut in half.

Her husband also had fallen victim to similar difficulties. When he went to Barclays Bank for advice on how to best invest a lump sum payout he had received from his pension fund, he was sold an investment product that cause him to lose half of his money in a two-year time period. Indeed, the investment product that was recommended to him by his bankers was one which the bank was later fined 7.7 million pounds for mis-selling to its customers.

While both husband and wife subsequently sought to recover some of their losses from their respective banks, and both did recover some funds, they were also both out a considerable amount to pay the necessary cost of pursuing their claims before the Financial Ombudsman Service.

Mrs. Adams ultimately recovered approximately 5,000 pounds, but suffered an out-of-pocket loss when taking into account fees that she was required to pay to a firm representing her before the Financial Ombudsman Service. Her husband achieved a similar result, recovering some of his lost funds from the bank, but in another sense losing funds because of expenses. He complained that it seemed to him that he had paid his bank, Barclays, an annual management fee to lose his money, which was certainly not what he had in mind. Subsequently, Barclays has reportedly ceased furnishing in-house investment advice to its customers.

The programme asserts that such stories are not uncommon, and that over-eager staff members at many banks, whose employers earn very little on advising customers to place their funds in ordinary savings accounts, instead advise them to invest in financial products that are inappropriate for their goals, resources, and desired level of risk.

The producers of the Panorama programme utilized the services of “mystery shoppers” to attempt to confirm whether the stories told by such bank customers as the Adams couple reflected an ongoing problem. The two undercover reporters they dispatched to the banks asked in-house investment advisors for a safe way to invest their purported 90,000 pounds in recently received retirement funds. They stressed the need for caution, and for the security of their funds.

A review of the resulting undercover camera films by two independent financial experts, Louise Oliver and Adrian Lowcock, indicated that none of the bankers broke definite rules set forth by the Financial Services Authority (FSA), there were instances in which they ignored more general principles set forth by the FSA designed to ensure that bank customers encounter fair treatment.

The manner in which fees and charges were explained to customers, for example, was rushed, with one advisor even stating that customers would not notice such expenses. This, one of the utilized experts suggested, could well result in investors lacking substantial experience not grasping what fees they would actually have to pay.

While most of the banks studied did properly assess investors’ risk profiles, some did not, with one banker at HSBC actually stating to a mystery shopper that he could determine what level of risk she would be comfortable with simply by examining her eyes. The same banker advisor neglected to even fill out a routine questionnaire concerning risk until a second meeting with the undercover mystery shopper.

HSBC responded to the report by indicating that it would study the issue and attempt to see if any of its advisors were deviating from what it regarded as desirable practices.

A bank employee advising one of the mystery shoppers at Lloyds TSB purportedly described its set up charges as market leading. Financial expert Oliver characterized this as misleading to the client, and intended to bolster the bank’s credibility and the merits of the investment vehicle it is offering, in order to close more sales with investors engaged in shopping around. Lloyds TSB indicated that any advisor doing what the programmed reported would not be meeting the bank’s desired standards.

In the programme, Eric Leenders, the leader of the British Bankers’ Association claimed that there are already necessary safeguards in place for the protection of the public. One financial advisor quoted in the show, however, disputed this, and contended that bankers offering investment advice to the general public are attempting to advise too many customers each day. She recommended a slowing down of the process in order to improve the quality of the advice dispensed, even if that results in fewer sales for the banks.

The entire programme, entitled “Panorama: Can You Trust Your Bank?”, first aired on BBC One on Monday 13 June, 2011, and is available for viewing in Britain at the following URL: http://www.bbc.co.uk/programmes/b0120ydb

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Tim Capper reports on Financial Mis-Selling for Maple Leaf Financial. Our aim is to ensure you get honest advice and proper guidance to ensure a suitable recommendation can be made to pursue a financial claim

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Tim Capper

Bringing you financial news and information in plain english for Maple Leaf Financial. My aim is to help readers understand these often complex financial instruments.