The letter says that many of the banks’ AIG clients were not made aware that the fund was not a straightforward cash deposit account with instant access.
It calls on the banks to take over the bonds themselves and pay clients the full value as at October 6 or provide an interest-free loan for the full amount and guarantee the AIG underpin on maturity.
It says victims may resort to the ombudsman or litigation if these measures are not introduced.
The letter says: “Your wealth management teams have lost all credibility as they run for cover, unable to deal with this issue. Clearly, this was a complex, sophisticated product suitable only for professional investors and to ensure that it was sold correctly required detailed knowledge and skill way beyond the abilities of your sales teams.”
St James’s Place this week offered to make a one-off goodwill payment of £6.9m to its clients in the AIG Life enhanced fund in proportion to the size of clients’ investments. SJP has £69m of client assets in the fund.
The firm is also offering to lend clients money at a rate of base rate plus 3 per cent if they decide to remain in the fund to maturity but have an immediate need for cash.
Investors wanting to leave the AIG Life enhanced fund on December 15 would be likely to lose around 12 per cent of their total investment compared with the value before it was frozen on September 15, according to an independent valuation by Cairn Capital.
The loss is towards the lower end of what AIG Life initially suggested, which was between 50 and 80 per cent of the enhanced part of the fund which could have led to a total loss of 25 per cent upon exit.
A spokesman for Coutts says: “We are working with clients individually and have made the recommendation that clients stay in the fund and we are offering them a loan if they have an immediate need for the money.”
HSBC Private Bank chief executive Declan Sheehan says: “In each case the AIG Funds were sold as an investment with the appropriate warnings on the risks for this type of product explained.”
A UBS spokeswoman says: “We have been working tirelessly with other banks and with AIG to protect our clients’ interests by improving the choices available to them.”