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Banking on bad advice

Yet another tale of horror has come to light about appalling financial advice given to consumers approaching or already in retirement, with devastating effects to their financial wellbeing.

And the villain of the piece is another major high street bank – this time Barclays.

This week’s issue of Money Marketing reveals that Barclays advisers at different branches across the country have been advising clients to cash in with-profit funds, bonds and other investments and put the lot into a single, high-risk unit trust. The advisers all chose the same unit trust in fact, which, incidentally, has high levels of trail commission.

Park House Financial Services partner Richard Davis says he has taken on six clients who have all found themselves in disastrous positions following Barclays’ advice.

He fears thousands more Barclays clients could be suffering from significant losses after receiving the same advice.

The fund that was recommended by Barclays was the Aviva (formerly Morley) balanced global income fund. It is featured in the Investment Management Association’s specialist sector and invests in convertibles, call options, non-investment grade bonds and equities. The fund has seen huge losses of 45 per cent in the 12 months to March 2009.

Davis is outraged that Barclays placed the unsophisticated investors’ entire long-term savings into one fund. He is setting up a website for disadvantaged investors with a view to a class action.

One client with two unit-linked investment bonds and an Isa, worth £95,000, was advised in November 2006 to cash in the bonds and transfer the Isa, reinvesting the total sum into the unit trust. Last month he surrendered the investment for just £45,000.

Another client with three with-profit bonds with a surrender value of £360,000 was also told to cash them in and reinvest the money in the same unit trust in July 2007. Last month his investment was worth £172,000.

Syndaxi Chartered Financial Planners managing director Rob Reid says: “If this is an institutional approach it is further evidence that the quality of advice emanating from the banks still has a long way to go before it is acceptable.”

But Barclays insists that all its recommendations are tailored to each individual customer and disputes accusations that its advisers are systemically recommending the Aviva fund.

Some complaints are with, or are on their way, to the Financial Ombudsman Service. It is hard to imagine they won’t be upheld.

As consumers continue to suffer at the hands of the banks, in some cases watching their lifelong savings disappear, what has to be done to stop this kind of bad practice?

It is well-known the banks are responsible for the vast majority of complaints to the Ombudsman, while IFAs account for just 4 per cent. The FSA has already rejected industry calls for a clear split between sales and advice under the RDR, but perhaps the behaviour of the banks in recent times could see the regulator change its mind.

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There are 20 comments at the moment, we would love to hear your opinion too.

  1. anyone surprised?
    Here we go again, the FSA’s mates the bankers screwing the punters, (they do not have clients)

    Clients go to an IFA!!


  2. Banking on Bad Advice
    Tip of the iceberg, Banks lure customers in with free reviews giving them the impression they have to have a review done, all part of the service. They then give the impression that all they’re doing is changing from one account to another which will be better for them, despite the advice being for asset backed investments the customer is left feeling that all they’ve done is moved accounts and it’s better for them. If you don’t believe it talk to you clients, especially the older ones who’ve been invited to the bank for a review.

  3. Banking on bad advice
    The FSA is run by ex-Bankers. They are hardly likely to change the remit of the RDR as it favours the banks. Besides they are far too busy trying to put those “nasty little IFA’s” out of business so that the Banks can have a clear run at everybody’s savings.

  4. same old
    We could read articles like this on a daily basis for the next 24 months, but nothing is ever done about it. The banks love for getting their hands on all upfront initail – WHICH THE FSA DISLIKE and I do not see anyone in the fsa doing much about it.

  5. Bank misselling for high commission
    And the comment from the FSA is………..? Nothing, of course. Too busy shuffling the chairs around on the deck of the Titanic and getting over having spent £200,000 of our money on its various Christmas bashes.

  6. Surprised?
    I’m surprised anyone is shocked anymore. Shock horror bank tucks up clients. They are a bunch of bandits and once we can get rid of this government and the regulator the better.

    We can then fill the regulator with industry practitioners from all industries to get some balance.

    Whilst the FSA check my TCF documents, the banks bankrupt the world.


  7. It’s not just Banks
    I have personal experience of a large building society that converted its tied sale force to IFAs who sold predominantly the latest or exclusive flavour of the month bond, with boosted commission, to its clients and couldn’t understand why real IFAs that they had bought sold a whole variety of products but not their bonds. We called it advice not following management orders.

  8. Not just the banks
    It’s not just the banks, I have personal experience of the activities of a well known building society that had a sales force of so called IFAs that sold to management orders better known as exclusive and boosted commission bonds.

  9. Bad banking advice.. nothing new. In 1993 I faced a target of £120,000 per annum in income for the bank. After being accused of blackmail twice in one week I resigned. I was with their ‘IFA’ arm which was pretty ruthless but they were cuddly bunnies in comparison to their direct sales arm. It doesn’t matter what the financial climate is like, their overheads must be met at any cost by any method which passes muster with their compliance department. RDR will not stop this, in fact it will make matters worse.

  10. Banking Bad Advice
    As a former Sedgwick IFA I witnessed first hand Woolwich & Barclays advisers surrendering clinets investments and investing the whole proceeds into one product or fund, which the sales management turned a blind eye to on a regular basis. What pissed me off the most was these same advisers were feighted as being gods as they had the highest business production.

  11. Legalised Pirates
    Will the FSA never learn. It is the banks that should have the FSA breathing down thier necks, not the small IFA practice that acts in the clients best interests. Banks control the FSA!
    The IFA community have less than 4% of complaints…because they care. The banks only care about their profits. Wake up FSA to the real world. TCF has been ingrained in IFAs before it was introduced by the FSA. We look after our clients and they stay, banks don’t look after their client sand they leave!

  12. Neil F Liversidge 15th April 2009 at 4:04 pm

    What a surprise – not.
    I’m just sorting out a client from whom Barclays took £34k in commission using products aimed at paying much higher than average initial and trail. Service has been minimal and Barclays negelcted to transfer funds across to ISAs each year, despite the clients needing the income to live off. The FSA’s bosses will nver sort out the banks and insurance companies because they know that’s where their next soft and highly paid job is coming from. I don’t respond to the FSA’s self-serving surveys anymore because I have concluded that talking to the FSA is a waste of time. It makes a lot more sense to write on a regular basis to your MP. If enough of us do it then the politcians have to act to kick the FSA into line. Stop being frightened of FSA victimisation and make your voice heard

  13. What a load of bankers!
    Anyone who had £360k in with profits bonds already needed their head examined but to then fall for a proposal to put all of the money in one funds is almost certifiable.

    I’m sure that the banks could earn the same amount of money by giving good advice – it’s a shame that (some) won’t do it. That said, I’ve seen some equally bad advice given by many IFAs over the years.

  14. Interesting Fact – IFAs with more banking exams than
    I’ve just seen my Bank Manager for a review. I’m an ex banker myself and having started in banking in the 80’s, a lot of my fellow IFAs are actually ex bankers with banking exams. It is then really ironic to be interviewed by a banker who has less banking exams than I have (in fact he had none, rather like some of the ehads of the banks) AND despite the fact he talks to his clients about mortgages, pensions and life insurance, only has campa 1 and 2 wheras I’ve nearly finished my diploma. The difference is, I give advice and he gives information (but I suspect his clients don’t realise it’s not advice) Its hardly surpirsing then that the FSA (staffed by bankers) does not understand the law of agency, but IFAs do and yet the FSA seem to have mudded the waters to their mates advantage since depolorisation so that clients don’t know who is the agent of who! The FSA’s recent CIC review showed that people didn’t know whether they were getting advice or information only and with no risk to the salesman on info compared to with advice, there is a real profit to be made from NOT making this clear.

  15. Not Happy with the FSA?
    Bearing in mind nearly every blog I read shows IFAs unhappy with the FSA, it’s about time more came off the fence and actually put their name where their mouth is rather than remaining anonnymous. Either that or at least get behin Evan Owen at IFADU so he can fight in a politically incorrect way against the F-Pack on issues where it is common knowledge they are probably wrong, i.e. refusing to release information under the FOI requests on legal opinion of FSMA compatability with the Human Rights Act and the Lautro Charges Issues. Anyone who now thinks that the F_Pack is not just a quango arm of the Treasury and hence any fees demanded by them are anything other than a tax is deluded.

  16. Where is the FSA??
    When it comes to the banks, nowhere it seems.
    Now if an IFA had given such advice they would have been nailed by the heels (quite rightly) to the canary wharf door by now!!

  17. Told you With Profits Aint so Bad!
    Hey, MVR’s of 20% look pretty good aginst a fall of over 40% in the FTSE and around 50% if you have a global portfolio. How many IFAs out there are willing to share how much their average clients portfolio has fallen over the last 12 months?

  18. But they will get away with it
    We all know the FSA is run by bankers for bankers so this news is no surprise to me. In fact after 2011 when most IFAs will have packed up there will be far more news like this as the banks will have no competition. I despair for the future of this industry.

  19. Barclays Again
    I have just lodged a complaint with Barclays for a retired client who has never before invested & had her entire savings of £30K put in the Aviva Balanced Global income Fund. If the complaint to Barclays is not upheld then obviously then this one will also go to the Ombudsman.

  20. Barclays Morley Fund
    Thank goodness someone has brought this to light!! I invested £52,634.00 (previous Barclays Investments) in May 2007 on the advice of a Barclays IFA and it is now worth £21,000.00.
    I have complained bitterly to Barclays who assure me it will go back up and they ring me every month (on my insistence) to report on the fund.
    Please let me know of the people – address/email/phone number- to contact to take this further

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