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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