You may have seen during the last week that HSBC Bank has been fined £10.5m by the Financial Services Authority (FSA).

The fine relates to advice given by a division of the bank, Nursing Home Fees Agency (NHFA), between 2005 and 2011.  The bank was fined due to poor advice given in relation to the sale of investment bonds to 2,485 individual elderly clients.  The £10.5m fine is only the amount payable to the regulator – the compensation amount for clients and their families is forecast to be £29.3m.

So how did this problem arise, and what is wrong with investment bonds?

The sale of certain investment products has long been highlighted as a problem, with high commissions paid to salespeople.  This is particularly true of many banks and building societies, where staff are given very high sales targets then offered the chance to earn commissions of up to 8% of the amount invested. 

Unfortunately this is not an isolated case.   The Consumer’s Association magazine Which? published a survey in November of 37 bank and building society advisers, which found that only 5 gave appropriate advice and 18 advisers claimed their advice was free (click here to see the report or see link below).

Some products, including investment bonds, can have opaque charging structures that give the customer the impression that they are not paying for either the advice or the product.  As with most things, there is absolutely nothing wrong with investment bonds provided they are used correctly with the costs, charges, advantages and disadvantages explained fully. 

As a qualified Later Life Adviser I believe that any advice to older people in respect of care costs or estate planning should only ever be conducted on a fee-basis.  This provides clarity for the individual client and their family, and a guarantee of no product bias. 

Whilst I will be writing more about paying for advice by commissions and fees in 2012, however if you have any questions in the meantime please get in touch. 

If you are looking for advice for someone in need of care the Society of Later Life Advisers (SOLLA) website will prove useful.  This not only provides impartial information from both a legal and financial perspective, but also gives details on how to find truly independent, impartial, fee-based advisers … including myself!.  (Further details can be found here).

Gareth Tregidon CFPCM

Which? report: “High street banks offer risky investment advice” (16 November 2011)


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