View more on these topics

£40M bill for HSBC misselling

The FSA has fined HSBC £10.5m for misselling investment products to elderly customers through its long-term care 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 customer age was almost 83 and total amount invested was around £285m, with an average customer investment of £115,000.

In June, HSBC said it was closing NHFA to new business, saying it “no longer forms part of the group’s strategic direction”.

A third-party review of 421 NHFA customer files found sales were unsuitable for 87 per cent of customers. In a number of reviewed cases, the customer’s life expectancy was less than the five-year minimum recommended investment term.

NHFA failed to adopt a consistent approach in assessing attitude to risk. It failed to consider other investments such as unit trusts and Isas and reviews of customer files show in many cases a different product should have been recommended or no product recommended at all. Advisers also failed to consider customers’ tax status.

NHFA was launched in 1991 and was bought by HSBC in July 2005. It regularly received customer referrals from health authorities and charities supporting the elderly and in recent years achieved an LTC market share of nearly 60 per cent.

HSBC’s compliance team did not detect misselling until July 2009. The bank will write to clients in the next few weeks and will write again once it has assessed where redress should be paid.

HSBC chief executive Brian Robertson says: “I fully accept that NHFA failed to give suitable financial advice to some of its customers.This should not have happened and I am profoundly sorry that it did.”

Examples of NHFA unsuitable sales

  • In a number of reviewed cases, the customer’s life expectancy was less than the minimum recommended investment term of five years.
  • One customer was aged 94 at the point of sale and had a life expectancy of three years and three months.
  • One customer, after buying an investment bond, only had enough cash on deposit to fund care costs for just over a year. The customer then needed to withdraw 12 per cent of the money originally invested a year, which did not allow the bond to cover the charges applied.
  • More than 30 per cent of a customer’s investment was in property funds, which the FSA says was an “unacceptable proportion” which may have posed “inappropriate investment risk”.


Multi-manager View

”For the last 20 years, when a private investor has consulted their financial adviser, they would be asked if they wanted to own stocks or bonds or a mix. In more recent times, risk might have been quantified, volatility explained and the time horizon emphasised. Most investors would have been told: “If you have a […]

Treasury U-turns on scrapping pensions compensation relief

The Government has abandoned plans to scrap tax-relief for compensation payments related to pension misselling. A Treasury consultation, published in June, proposed removing the relief in the Finance Bill 2012. Under current rules, compensation payments made in connection with personal pensions that were missold between 1988 and 1994 are not subject to income tax or […]


Steve Webb: Help us cut pensions red tape

Pensions minister Steve Webb is planning to crackdown on unnecessary pensions regulation as part of the Government’s ‘red-tape challenge’. Speaking at the NAPF trustee conference in London today, Webb (pictured) said the Government is looking at ways to simplify pensions rules where possible. He said: “We are going through a process in Government which we […]

A modern horror story

Every day a quick scan of the news reveals some new horror that will change the lives of those involved forever – the unlucky accident on the way to work, a tragic illness that cuts a young life short or the holiday accident that leaves more than just a scar to cope with. We barely […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm