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Barclays has more questions to answer

Barclays will have to think again if it believes its extremely limited mea culpa over the advice given around investing in Aviva’s global balanced income fund has put an end to the matter.

After failing to give much of a response to Money Marketing’s original revelations regarding a number of clients who were advised to put their life savings into the single fund, Barclays finally offered what it hoped would be seen as an explanation for the episode.

Following the story being picked up by the BBC, Barclays told us that there had in fact been a slight issue with the fund and that an error had resulted in the fund being categorised as a balanced fund rather than an adventurous fund between July 2007 and November 2007.

Barclays said affected customers would be restored to the position they would have been in had they invested in an equivalent balanced investment of a similar nature (this in itself has created quite a controversy ).

And that was the end of the non-apology. No justification or defence of the fact that in so many of these cases clients approaching or in retirement were advised to cash in all their investments and put them into this one fund.

No excuses or rationale for the central charge of bad advice that was being laid in front of the bank in the form of these complaints.

The Barclays response went on to state that its advisers are paid a flat fee for investment products so there is “no incentive to sell one investment product over another”.

Again the response misses the point. The advisers may or may not have been incentivised to recommend the fund above others through higher commission levels but this statement does nothing to soften the accusations.

There are plenty of other potential biases in the market, not just commission bias. As we have seen so often in recent months the sales culture of large banks can easily create an environment where the needs of the bank adviser to meet their targets takes precedence over the needs of the client.

Although I am not privy to the terms of any multi-tied arrangements, such as the one that took place between Aviva and Barclays, you could imagine a fair amount of pressure was applied to ensure a steady flow of money into the fund.

Whether or not higher commission levels were paid to individual advisers is neither here nor there and looks like another attempt to muddy the waters.

Park House Financial Services partner Richard Davis, who originally complained to Money Marketing about the advice his clients were given by Barclays, says around 200 disgruntled investors have come forward and estimates this could rise to 5000.

A number of these cases are now lodged with the Financial Ombudsman Service.

Barclays still has plenty of explaining to do and may find it harder to fob off the authorities with the same statements it has given Money Marketing.

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Mary Stewart

Training to be a vet is not the most conventional route into financial services but Hornbuckle Mitchell’s marketing director Mary Stewart began her working life caring for animals. After four years as a vet, she decided to try her hand at sales and marketing as she had always been interested in business so she joined Mars to promote a range of prescription foods for cats and dogs to vets.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Barclays
    Surely I’m not alone in believing that these companies really think that they can just do anything they want. They seem to be totally unfazed by complaints, however many people are involved and they seem to feel that “justice” is whatever they decide it should be.
    The problem is obviously weak regulation. If they had any fear of the regulator they would not dare treat customers in this way. Bearing in mind that this is against the backdrop of an economic crisis caused by these organisations (and allowed to happen by the regulator). You’d think, in such circumstances, they’d be doing everything they could to be seen to be cleaning up their acts. Obviously they are not.
    It’s a more frightening world they we’re heading towards as far as investments are concerned as the RDR is heavily weighted in favour of these organisations. Why are we creating a system that will give us more of the above and less of the IFAs that wouldn’t have had anything to do with a mess like this in the first place?
    Will we ever learn?

  2. Barclays and The Aviva Global Balanced income Fund
    Whilst generally, last week was not a good week for apologies, the PM has this week apologised on behalf of all political parties over MP’s flipping properties debacle. Ever optimistic, we should expect bankers to do likewise. Rarely does it cost anything to say “…sorry, we got it wrong. It happened, and we regret it. What is more we’re doing everything we can think of to make sure it doesn’t happen again.” It’s human to err, but equally it’s polite to apologise. The sector would be a better place for all if an apology, where one was due, was the norm, and that people didn’t see having to apologise as a weakness to avoid exposing.

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