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Topics: HSBC| NHFA| investment bonds| Retirement
A former adviser at NHFA has launched a stiff defence of the advice given - and products sold - by most of his ex-colleagues after parent company HSBC was fined £10.5m for mis-selling investment bonds to the elderly.
The employee, who asked not to be named, said NHFA regularly sacrificed commission to ensure maximum allocation rates on the products and claimed the company negotiated "unusual" deals with providers so the investments did not invoke penalties for withdrawals or early encashment.
HSBC, which acquired NHFA in 2005, was fined £10.5m by the FSA last month for the mis-selling of investment bonds by the advisory business in the five years to July 2010. The products were sold to the elderly to pay for care fees.
A sample of 380 customer files assessed by a third party on behalf of the FSA and HSBC found unsuitable sales in 238 out of the 255 customer files that involved the sale of asset-backed investments.
According to the FSA report, high levels of withdrawals were arranged in some cases, eroding the invested capital to the point where charges could not be met.
But one former adviser said most NHFA intermediaries did everything they could to ensure a suitable product was sold.
Documents seen by IFAonline show the company negotiated deals with providers including Axa, Canada Life and Aviva which omitted early-exit penalties and ensured 100% allocation rates.
"We went to great lengths to ensure that if access to these bonds were to be required during the first five years, only these penalty-free access bonds were used," he said.
Other former employees said mis-selling made up only a tiny minority of NHFA business and accused HSBC of tarnishing the reputations of every NHFA adviser.
Tom Scott, an adviser at the company between 2004 and 2008, said he was "amazed" at how quickly the bank distanced itself from NHFA.
"Most of what NHFA did would be quite defendable," he said. "In almost every case, products were sold through power of attorney, and not directly to vulnerable clients.
"The press coverage made it sound like a company of high-pressure sales people rushing round selling to old ladies, when it was anything but that. Seeing a client from start to finish might take six months. It wasn't easy business."
On the Norwich Union Life Portfolio Bond, NHFA advisers sacrificed commission in order to achieve 100% allocation rates for all clients, regardless of age.
The Standard Life Drawdown Investment Bond promised "no exit penalties at any time", as well as a "significant commission sacrifice".
Similar deals were negotiated on the Friends Provident Investment Portfolio Bond and the Legal & General Investment Bond.
A HSBC spokesman said that whilst the bonds used by NHFA were not deemed inappropriate, "not enough of customers' capital was allocated to cash".
"Investment bonds, whether with or without an exit penalty and if sold suitably, are an important investment option for customers," it said.
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Imagine no mis-selling, its easy if you try to own a LTC IFA
I'd like you to imagine for a moment that you own a big bank. Now imagine that you have a small problem. Suppose your snivelling little bank advisers have been flogging old ladies unsuitable structured products and bonds. When the FSA/press find out your name will be mud and people will trust you even less than they do now. Suppose that a few years back you had bought a long term care IFA company that had made nothing but losses for you since. You might be thinking "if only I could dump my bank advice in the IFA company I could stand well back from it and let the IFA's that worked their take the heat and be completely discredited. My bank could say sorry we didn't monitor them very well but we could look like the good guys by bringing it to the FSA's attention". I mean, YOU wouldn't do that because you're a decent person and it would be a despicable thing to do. And you would know that sooner or later the truth would come and find you. And when the truth finally hits your fan the stench is going to go everywhere.
Posted by: Tricia Yates
The truth will out
Thank you to my ex colleagues and to Tricia who have had the guts to come forward and open the can of worms that I am sure HSBC would not like to have been opened. There is so much more to this story that can be told, if anyone is prepared to listen. NHFA was such an ethical company and have been used as a scapegoat.
Posted by: Ex NHFA Adviser
Hopefully the truth will out.
Hopefully the truth will come out and it is not as told by the fine as that did not paint the picture I know of NHFA. I'm convinced there's a lot more to this if only a suitable journalist would do some digging. No mention of the letters of thanks from clients (mostly attorneys as already stated above) saying thanks for all the help in making sure that care fees were paid and taking that worry away. Things changed when HSBC took over and it wasn't for the better for clients. NHFA did not do pressure sales.
Posted by: Catherine
The truth be out
Tricia's comment makes you think about the HSBC customers who did not receive NHFA advice. About 20% of the population bank with HSBC, applying this % to the number of new self-funding care home residents each year then HSBC customers would account for about 12,000 of them yet only a couple of hundred a year were referred to NHFA advisers from HSBC branches. Who advised the other 11,800, bank advisers?and what advice did they received if they ddn't have access to the NHFA special products?
Posted by: Anonymous
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At Last
At last the truth is finally coming out. A typical NHFA investment bond would have 102% allocation, 101% on death and no early exit penalties. Axa let us use their Trustee Bond which had a death benefit guarantee. These products meant that in the event of an early death the clients didn't loose out. In the event of longevity they had a good cautious investment. They may not have been particularly tax efficient for people that were mostly non taxpayers but ask an attorney whether they would prefer the above structures or an ISA with a 3-5% initial charge and guess what they choose. So if, as we have known all along, NHFA didn't mis-sell to the elderly - who did? I don't think you have to look too far.
Posted by: Tricia Yates