The FSA’s final notice relating to the sale of Keydata products by Norwich & Peterborough advisers reveals a shocking lack of regard for customers who put their faith in a trusted local institution.
The building society was this week fined £1.4m by the FSA and has agreed to pay customers a total of £51m to compensate for losses suffered after receiving unsuitable advice to invest with Keydata.
Over three years, 3,200 N&P clients invested in Keydata products. An independent third party found a sample of 65 per cent of N&P sales to be unsuitable but the FSA suggests this level to be significantly higher.
The average age of N&P clients invested in Keydata was 62 and many had indicated an unwillingness to risk capital. In a familiar story from misselling scandals of the past, N&P advisers emphasised the fact that products were not linked to stocks and shares but failed to make clear they still carried significant risk.
To make matters worse, concerns about the firm’s advice processes were raised by an internal compliance review in June 2007, triggered by the fact that Keydata products formed 30 per cent of all investment products sold in the first three months of the year. No action was taken as a result of this review and Keydata sales remained high, enabling the firm to accrue a total of £2.7m in commission from the sale of Keydata products.
N&P chief executive Mike Bullock announced he was to retire at the start of the year and it appears likely the firm will merge with another building society as a result of this fiasco.
N&P’s advisers were tied to Norwich Union before becoming IFAs in 2003 but, judging by the FSA’s final notice, the advice proposition was not up to the standards consumers are entitled to expect from an independent adviser.
It is impossible not to draw parallels between the failings revealed in this final notice – for instance, exposing older clients to unacceptable levels of risk with products they do not understand – and complaints we often hear from consumers about the behaviour of some high-street banks.
Barclays has already been fined for failings over the suitability of advice. Would thorough reviews of the sales processes of a number of other institutions, for instance on the large number of corporate bonds sold through branches in 2009, yield similar results?