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Caught in the net

I have always been a huge believer in the power of the internet. More than any invention in the past 50 years, the web is helping reshape our lives in a way barely imaginable even a decade ago.

Its effects range from the dramatic to the prosaic. In the latter category, the online world offers an opportunity for financial services voyeurs like myself to check how the claims that companies make about themselves match up with reality.

Take Thinc Group, for example, proudly proclaimed a “top five UK financial services group” on its website. It is not entirely clear what that means, presumably a reference to the fact that Axa paid an eye-watering £100m to acquire the business at the end of 2006.

The acquisition is itself interesting as £30m of that money went to pay off the national Thinc’s debts following the IFA firm’s own buying spree in earlier years.

At the time, a number of people in the financial services business told me that Thinc Destini, as it was then called, was heading for a bout of indigestion as it struggled to integrate the IFA businesses it was buying.

But anyway, back to Thinc group. This is a company that, as its website also tells us, has “quickly built up a reputation for providing high quality face-to-face advice on all aspects of finance, including financial planning, mortgages and commercial finance”.

“It is a financial services organisation that believes in looking forwards not backwards.”

Of course, in recent years it has become clear that, with many investors staying out of the market, certainly compared with the heady days of the late 1990s, when organisations believe “in looking forwards not backwards” they are professing a need to focus on new areas of business, like mortgages, perhaps.

Thinc has successfully done just that with its £4bn of annualised mortgage lending – again as its website informs us.

Key to its success in this market is that “Thinc Group’s approach to mortgages is simple; we put you, the client, first. This enables us to create an individual solution to meet your mortgage needs”. This, we are told, means a Thinc mortgage adviser is “your indispensable guide in finding the right mortgage for your dream property”.

Would-be borrowers chasing the home of their dreams can rest assured in the knowledge that Thinc “recruits only professionally trained, industry proven advisers with a reputation of delivering customer-focused excellence”.

“Award-winning training and assessment ensures that our advisers are up to date with the latest developments throughout the financial industries and ideally positioned to best meet your individual needs.”

Fast-forward to last week, when the FSA announced it was to levy a huge £900,000 fine at Thinc Group for being unable to produce records to show why 775 of its customers were advised to take out some £76m of sub-prime mortgages between January 2006 and September 2007.

The watchdog said Thinc had failed to demonstrate that its customers’ credit histories meant a sub-prime loan was the best option for them or that it had considered if they were able to afford the mortgages recommended to them.

In some cases, the FSA said borrowers had received suitability letters from Thinc that did not even correspond to the mortgage they had been advised to take out.

Moreover, when the FSA’s first inspection was followed up with a second visit last year, the regulator found the firm’s changes to its internal compliance systems to have been “ineffectual and inadequate”.

Now, let’s be clear – the FSA does not say these sub-prime mortgages were missold, only that proper records were not made and kept. But it is nonetheless intriguing that, as any broker will know, sub-prime mortgages are potentially the most lucrative type of homeloan from the adviser’s point of view.

Indeed, Thinc is said to have earned £700,000 out of recommending this particular type of mortgage to its clients. Presumably, its “profess-ionally trained, industry proven” brokers also walked away with a few quid in extra bonuses for demonstrating how they were living up to their “reputation of delivering customerfocused excellence”.

Which leaves us with three questions.

First, did Axa know in mid-2006 what was brewing in its intended takeover target’s mortgage broking arm?

Second, does Axa still think, as it did in late 2006, that the acquisition “will enhance the Axa Group’s position in the provision of financial advice and planning within the UK market”?

Third, who on earth writes this rubbish? I mean, is there any business anywhere in the world that does not believe in “looking forward not backwards” or that does not feel itself to be “dynamic and exciting”?

The problem with the internet is that too many people assume they can write any old nonsense on a corporate web page and no one will notice. Unfortunately for them, we do. And, thanks to the power of the printed page, you do too.

Nic Cicutti can be contacted on nic@inspiredmoney.co.uk

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