FSA notice lays bare Bank of Scotland's investment advice failings
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The FSA has set out the extent of Bank of Scotland’s poor complaints handling, revealing that many of the complaints relating to the bank’s retail investment products came from inexperienced investors aged over 60 years old.
The FSA announced this morning that it had fined Bank of Scotland £3.5m for poor complaints handling relating to retail investment products.
The bank will also review its investment sales to 8,000 customers who were classed as having a cautious attitude to risk between July 30, 2007 and March 1, 2010, and pay compensation where appropriate. The advice failings centre on a risk profiling tool used by the bank during these dates which classified these clients as having a cautious approach to risk.
Bank of Scotland, part of Lloyds Banking Group, has already paid £2.4m in compensation to customers whose complaint was upheld following an internal review of complaints the bank had originally rejected. The bank is facing a further compensation bill of around £15m.
The FSA issued its final notice against Bank of Scotland on May 23 and published the notice today.
In mid 2009 the regulator carried out a review of complaints handling within Bank of Scotland as part of a wider review of complaints handling by major banks.
At the same time Bank of Scotland carried out its own review of 275 complaints relating to the bank’s collective investment plan, personal investment plan, the guaranteed growth bond , the Isa investor, and the guaranteed investment plan.
The sample of complaints focused on investment complaints the bank had originally rejected and which had not been subsequently referred to the Financial Ombudsman Service.
Bank of Scotland has decided that in 45 per cent of such cases to now uphold the complaint.
The final notice reveals that out of the 275 complaints reviewed, 77 per cent were made by inexperienced customers and 55 per cent were from those aged over 60.
It also points out that although Bank of Scotland identified back in November 2007 that the FOS was overturning over 40 per cent rejected complaints referred to it, the bank did not revise its complaints handling policy until July 2008.
Updated guidance was not given to the bank’s complaints handling team until November 2008, a year after Bank of Scotland first identified there was a problem.
Bank of Scotland is to review all the retail investment complaints from customers it rejected between February 1, 2004 and December 31, 2009.
Bank of Scotland has until June 6 to pay the £3.5m in full to the FSA.
Bank of Scotland risk director Ray Milne says: “We recognise that on this occasion we have fallen short of the high standards of service our customers should be able to expect of us and we apologise to them for this. We are committed to putting this right and have co-operated fully with the FSA to determine the proper course of action for these customers.
“We are in the process of contacting affected customers and will pay compensation where it is due.”
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Readers' comments (3)
Exasperated Me | 25 May 2011 4:57 pm
This is atypical of banks full stop, the winners of the RDR battle will be jumping for joy, £3.5 million is peanuts, not even their money!!
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Julian Stevens | 25 May 2011 9:49 pm
What else is to be expected when you have an institution with a very limited range of products to sell and a culture in which the salespeople are under threat of hostile action from their sales managers if they fail to flog enough of what they're under pressure to sell?
The only way to meet their targets is to sell inappropriately, the result of which is that risk-averse customers are sold by the bucket-load potentially risky products. The conflict of interests is glaringly obvious, yet all the FSA does is impose fines after the damage has been done, in the hope that nobody will notice that it should have prevented these mis-sales before they were perpetrated. Meanwhile, the people at Canary Wharf continue vigorously to perpetrate the myths that the IFA business model is somehow broken and that the RDR will fix everything. It's all a crock, isn't it?
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Julian Stevens | 25 May 2011 9:49 pm
What else is to be expected when you have an institution with a very limited range of products to sell and a culture in which the salespeople are under threat of hostile action from their sales managers if they fail to flog enough of what they're under pressure to sell?
The only way to meet their targets is to sell inappropriately, the result of which is that risk-averse customers are sold by the bucket-load potentially risky products. The conflict of interests is glaringly obvious, yet all the FSA does is impose fines after the damage has been done, in the hope that nobody will notice that it should have prevented these mis-sales before they were perpetrated. Meanwhile, the people at Canary Wharf continue vigorously to perpetrate the myths that the IFA business model is somehow broken and that the RDR will fix everything. It's all a crock, isn't it?
Unsuitable or offensive? Report this comment