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Lloyds to investigate Scot Wids structured products sales


Lloyds Banking Group is to review the sales of Scottish Widows structured products over a five year period and pay compensation to customers where appropriate.

The review has been triggered by a Money Mail investigation which says it has found evidence customers in their 60s and 70s had been promised 100 per cent capital protection and returns of up to 75 per cent which have not materialised.

The newspaper sent its investigation to Lloyds group chief executive Antonio Horta-Osorio and Financial Conduct Authority chief executive Martin Wheatley last month.

The bank is now in the process of paying compensation to those who were missold, and is investigating complaints relating to product sales between 2007 and 2012.

Lloyds has set up a special complaints team to review every policy that matures with a poorer return than an average savings account. The review will focus on customers at or near retirement; who had never invested in the stock market before; who were pursued by salesmen after receiving a cash windfall; and who were told to invest a large portion of their life savings. If products were missold the bank will pay compensation equal to the return on a cash savings account, typically Bank of England base rate plus 1 per cent.

Money Mail investigated sales of the Scottish Widows Capital Protected Fund 5, the Scottish Widows Protected Capital Solutions Fund, and the Scottish Widows Guaranteed Investment Bond.

The Capital Protected Fund was linked to the performance of the FTSE100 which stood at 6,046 when the policies began and finished only fractionally higher when they matured.

A total of 25,616 Capital Protected Fund products have matured in the last six months, and a further 5,993 policies matured last week.

The Protected Capital Solutions Fund has had 2,827 policies mature to date, and the Guaranteed Investment Bond had had 8,551 mature since May 2012.

Money Mail reports that Lloyds has said the review will also address allegations that branch advisers misled customers over the products’ charging structures.

Lloyds head of retail banking Alison Brittain told the newspaper it will investigate whether products were missold as they mature. She says: “We will strive to deliver fair outcomes for all our customers and will assess each case on an individual basis.”


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There are 16 comments at the moment, we would love to hear your opinion too.

  1. Here we go again. Another blinding example why

    the general public do not trust financial advisers. Remember folks, these guys and girls were all fully qualified, and supervised by the regulator.

    Only when you remove the target culture of this industry will you stop this kind of behanvior.

  2. Totally agree – having worked in a bank for several years and experienced the pressure to sell and meet targets or lose your job what do they expect??

  3. Former bank adviser 10th April 2013 at 10:02 am

    I worked at a major bank, they had league tables for structured product sales. The line managers used them to ‘threaten’ advisers to sell more, the usual tactic was ‘they are selling them, why aren’t you…..’. Banks are in a great position, they have the clients with money on deposit to invest, yet they cannot be trusted. It is the heads of business and advice in the banks that need to be de-authorised, only then will the message get across.
    Too many members of the public have been given bad advice, this is why the ipad generation will not seek advice and do it themselves.

  4. RegulatorSaurusRex 10th April 2013 at 10:04 am

    @ Anonymouse 9:26

    That is a very naive assumption, the industry survives on consumers taking action, if consumers can’t be persuaded to hand over money then you will all starve.

  5. ‘if consumers can’t be persuaded to hand over money then you will all starve.’

    I think those comments encapsulate the problem with financial services sales practices pretty clearly.
    (IFA who was a former Bank/Life sales manager perhaps ?)

  6. Having worked for ‘Rats Nest’ for several years. If you did not reach your allocated sales target when a new structured release was launched you were ‘invited’ to attend a phone conference after business hours with other naughty boys for group public flogging, combined with the option to change occupation if you felt you couldn’t advise customers ‘properly’ to protect their ‘families,futures and finanaces’. The sales manager concened has since moved to Nationwide as a sales director and I understand its ‘business as usual’.

  7. I you for a Building Society through a well know insurance company and also a major Bank until 2007 when I became independent because I was fed up of the endless pressure to sell products I didn’t agree with. The bullying culture within banks and building societies was rife during the 90s and the 00’s. I refused point-blank to sell these products are remembered having a number of arguments to the reasons why. I even remember standing up to one manager saying can you send me an email instructing me to show product biased because that is what you are effectively asking me to do. Needless to say I never got that email.

    Structured bond is in my opinion are one of the worst inventions in financial services and I suspect many on here would argue that there like Marmite you either love them or hate them. I always hated complicated products that try to make out that they were simple.

    When is a guarantee not a guarantee? When it’s a structured product!

  8. Read about my campaign against Chelsea Building Society misleading structured bond product posters that eventually got banned

    Until we take action against individuals in control within insurance companies, banks, and building societies we will be doomed to repeat the mistakes of the past. After all there was somebody signing off this sell culture and effectively instructing managers to turn the pressure up on sales staff.

    We also have guilty individuals still employed within the regulator as they were responsible for monitoring these practices. Surely the same individuals have questions to answer to why they didn’t take action particularly if they are still in post.

  9. I worked at an IFA division of a major bank and found that large amounts of these products were being recommended as an alternative to deposits.

    The IFAs had to work off a panel, and so someone high up obviously signed off this addition to the panel and decided its risk category. It was generally the least well qualified staff or the least experienced staff that sold these products, usually to risk averse customers, as they did not have the knowledge to question the product.

    I don’t care how these are packaged they are not simple products and clients need to know exactly what they are buying, if someone feels that this is an appropriate investment.

  10. For me, Structured Products are a clear example of where conflicts of interest can arise between a client and an adviser.

    They are opaque, paid commission, can offer ‘guarantees’, there’s no clear charging structure and can offer ‘market beating returns’.

    But, of course, that doesn’t paint the full picture….

    I have no issue in using them (where appropriate, in a balanced portfolio) – but it would appear that they were being sold en-masse as a magic bullet to solve low cash rates and market volatility.

    If the advice is unbiased and impartial then products like this don’t need to be sold – they should simply form part of an overall strategy IF they are appropriate.

    Perhaps Banks should be asked to demonstrate how they ensured there was no conflict of interest between their advisers and their clients?????

  11. Having worked in a bank for years, I would agree with most comments around being demonised for not selling and hitting targets. It has always been a case of ‘you’ve got to see 15-20 customers a week and you need to sell at least 5-6 investments’. One senior manager used to regularly tell everyone they didn’t treat customers fairly if they hadn’t sold them something.

    A digraceful system that has put to waste some intelligent caring individuals by making them feel as if something was wrong with them because they couldn’t sell the ‘product of the moment’ to every customer that was put in front of them.

    Isn’t it amazing that the same ‘directors’ that calmly state that they will do everything to make sure customers are not disadvantaged are the same people who put pressure on all the advisers (on pain of being managed out) to sell these inappropriate products in the first place…and they call policiticans two-faced!!

  12. I remember well sitting in a sales meeting in a former bank (now Spanish owned) and told by the sales manager to write the ‘with profit bond’ figues in a passbook if the client wants one. They never apply the MVA so there will never be an issue.

    Whe the inevitable customer complaint arrived the sales person concerned was dismissed, cited this guidance and was reinstated by the bank immediately. The sales manager concerned had her fingers burned, then found another reason to ‘manage out’ the sales staff member originally dismissed.

    Anyone who has ever been in sales management in a financial services company is without any form of moral compass whatsoever and completely unemployable elsewhere.

    There are still too many of these in the industry with their ‘foot in the door’ sales techniques, simplistic sales ideas and bullying behaviour. Sorry, boys and girls, the World has moved on from the 1950’s-80’s. This is the internet generation, and are smarter than in the past. if you don’t start treating your customers (and staff) fairly, they’ll walk. There are plenty of other options to purchase products out there nowadays.

  13. The regulator has got it wrong once again.

    People were not ‘incentivised’ to sell this stuff, they were threatened if they didn’t. ( Or maybe ‘incentivised’ is financial management speak for ‘bullied’ ?)

  14. Missold Investments 10th April 2013 at 4:38 pm

    Mis-selling is about the sale, not the investment outcome, yet Lloyds say they will ‘investigate mis-selling as the plans mature’. Perhaps they’ve missed the point. Why do these firms use the term ‘capital protected’ when capital is not actually protected? The Scottish Widows ‘Capital Protected’ Fund 5, for example, carried credit risk for LLoyds TSB as counterparty. If the bank had not been rescued, savers might have lost the lot, like thousands of UK savers with Lehman-backed ‘capital protected’ plans.

  15. MIssold Investor 10th April 2013 at 4:41 pm

    Mis-selling is about the sale, not the investment outcome, yet Lloyds say they will ‘investigate mis-selling as the plans mature’. Perhaps they’ve missed the point. And why do these firms use the term ‘capital protected’ when capital is not actually protected? The Scottish Widows ‘Capital Protected’ Fund 5, for example, carried credit risk for LLoyds TSB as counterparty. If the bank had not been rescued by the Government, savers might have lost the lot, like thousands of UK savers did with Lehman-backed ‘capital protected’ plans.

  16. I couldn’t agree more with Anonymous | 10 Apr 2013 12:41 pm, same experiences I and many of my former colleagues had at the banks. Most of us (who left voluntarily) are or have been IFAs now.

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