View more on these topics

Whistleblower claims savers were moved from cash to bond funds

HBOS whistleblower Paul Moore has told MPs that he believes the firm’s advisers moved many retail savers from cash into corporate bond funds without them understanding the additional risk.

In new written evidence submitted to the Treasury select committee, Moore claims to have repeatedly called for a review of corporate bond fund selling practices in 2004 after seeing a boom in sales.

He says his call for a review was ignored by Jo Dawson, who ran the HBOS salesforce at the time, until the FSA specifically required the bank to look into corporate bond sales.

Moore said: “As the yields went down on standard deposit accounts, many customers were switched into corporate bond funds and the group regulatory risk department and I were not confident that customers who were switched out of deposit accounts into CBFs would really understand the additional risks they were taking on and we wanted to ensure they did.

“What was clear was that the advisers were strongly targeted to sell CBFs to deposit account customers whose deposits mat-ured and the margin that HBOS made on CBFs was very much higher than on deposit accounts. This obviously increased the incentive to sell them.”

Moore also said he raised concerns over the potential misselling of payment protection insurance at HBOS.

Worldwide Financial Planning IFA Nick McBreen says: “I have had recent experience of clients that have been moved from deposit accounts into corporate bond funds by bank advisers and were told the products were low risk. People are under the illusion that you can just compare the yield with an interest rate but it is not that simple and you have to consider the fact that charges are deducted from capital, not income.”

HBOS could not provide figures for the number of depositors switched into corporate bond funds over the period.

Recommended

Exemption to the rule

With the approach of the end of the tax year on April 5, clients considering any form of inheritance tax planning would be well advised to make certain that they use their exemptions.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com