Symponia defends investment bond LTC use following HSBC fine

Long-term care specialist Symponia has defended the use of investment bonds to fund long-term care following HSBC’s £10.5m fine for misselling the products to elderly customers.

The FSA fined HSBC £10.5m yesterday for inappropriate investment advice through its LTC advice arm Nursing Homes Fees Agency.

HSBC estimates a further £29.3m will be paid to NHFA customers in compensation.

Between July 2005 and July 2010 2,485 NHFA customers were advised to invest in asset-backed investment products, typically investment bonds, to fund LTC costs. The average NHFA customer age was almost 83. The total amount invested was approximately £285m, with an average customer investment of £115,000.

HSBC closed NHFA to new business in July.

But Symponia says it is important that consumers know investment bonds can still be a tax-efficient way of generating income.

It argues problems emerge where advisers fail to explain the impact of regular withdrawals.

Symponia joint founder and director Janet Davies (pictured) says: “The fine against HSBC is the first time that care fees advice has been tarnished with misselling and of course even one case is too many for the families involved, with whom we sincerely sympathise. 

“But it is important that bonds are not vilified, as how they are applied is critical. 

“There seems to be an element of NHFA being used as scapegoat here. HSBC would have carried out its own due diligence on the group when it purchased the organisation six years ago and the NHFA model has not changed since then.”

Davies adds she is hopeful the move to adviser charging under the RDR will remove the bias where advisers were encouraged to sell products to fund long-term care, rather than giving them the best advice, which could mean waiting to take out a product.