HSBC financial services division redundancies

Bevan & Buckland AccountantsDo you (or should I say “did you”?) get financial advice from your bank?

HSBC’s announcement yesterday that they are making 650 people redundant from their financial services division may have been missed by many.  This follows the 460 made redundant from the same division plus those from its NHFA independent arm in 2011. In this post Certified Financial PlannerCM and manager of Bevan & Buckland’s Financial Planning department, Gareth Tregidon, explains what this means and why it is an important development?

HSBC announced the closure of its tied advice division yesterday as part of a total 2,217 job losses.  The tied advice division provides advice to the majority of the bank’s customers through their branch network, including pensions, investments and insurance policies.  The bank is apparently retaining an independent advice offering, although this appears to cover only their Premier and Private banking operations. 

So why has HSBC taken this decision, and what are the implications?

Firstly it is important to note that anyone with an existing pension, investment or insurance does not need to worry about their policies.  HSBC will still be managing the money held in a pension or investment fund, and providing the insurance cover.

The bank has stated that the decision has been taken as it will no longer be able to afford to offer “mass-market financial advice” once the Retail Distribution Review (RDR) comes into effect on 1st January 2013.  We are planning more on the RDR and the impact this will have on the provision of financial advice in future posts, but what it means in this instance is that banks have been reviewing how much money they make from financial advice, what it will cost them to become compliant with the new rules, and whether they can make enough money from this in the future. 

HSBC are the second major bank to pull out of providing branch-based financial advice, following Barclays’ lead earlier this year.  With the major changes being introduced from next year, is this move really a surprise?  Well, to most of us who have been around this industry for a while, the answer has to be “No”.  However I have to admit to having mixed feelings on the subject.

Firstly, anything that reduces public access to financial advice is, in my view, a bad thing and the banks have provided advice for many years to people who otherwise wouldn’t have received it.  Whilst some areas of advice back then were poor (mortgage endowments spring to mind), we also had more people with life assurance, and a greater number putting money away for retirement, than we do now.  Much of this was due to the availability of advice from the banks and people like “the man from the Pru”!

This is not a reflection on all bank advisers.  I spent several years working for what was then Midland Bank (initially as a tied adviser and latterly as an IFA), and then as an IFA for a firm that was subsequently bought by Barclays.  During this time I worked with many individuals that I would trust implicitly.  The banks in general have provided advice to a far greater percentage of the population, and to different segments within it, than can be covered by most IFAs.

However, with an increased pressure on sales targets financial advice from many banks has appeared, in general terms, to get worse over recent years.  Several of the main banks having been fined by the regulator over poor quality advice: Barclays received fines of £1.1m & £7.7m (plus a £60m+ provision to repay affected clients), HSBC £10.5m, RBS/NatWest £2.8m all in 2011, and Santander £1.5m in 2012. 

This latter point is particularly relevant when considering what’s ahead in 2013, and how this will affect anyone who receives financial advice.  The indications are that a significant number of advisers either have or will be leaving the industry, and the increasing regulation and requirements on firms in the future will push up costs.  Many firms that are currently independent will become what the FSA have termed “Restricted”, although in reality this will not mean a change to the advice their clients receive. Gareth Tregidon

The landscape for financial advice will be changing significantly in the next few months, however more on that to follow in the near future!

Gareth Tregidon

Financial Planning Manager

Certified Financial PlannerCM

Accredited Later Life Adviser

 

 

 

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: