Notes on a HSBC scandal: Long Term Care is not just press cannon fodder

Back in July, journalists and the care industry alike wondered why HSBC hurriedly closed market leader, Nursing Homes Fees Agency

The IFA was a well-respected pioneer in advising the elderly on their funding options. We were shocked by the revelation that NHFA systematically mis-sold investment bonds to 2,485 pensioners over a five year period. But, this is not just another greedy banking scandal to fill the pages of newspapers. 

Long-term care is already precarious in the public eye and should encourage grown-up debate: not fear; tips to empower people to seek advice: not shy away from the fact they might one day need it. If those who ignore the issues, are now hooked by lurid tales of greedy IFAs - how will Dilnot's invitation for financial services to address the funding gap, ever be taken seriously? Advisers and advocates of care have felt a real sense of disappointment since the news was announced.

Public perception

SOLLA's joint chair Tish Hanifan warned: "It could understandably put back consumer confidence" at a point where it appeared the care market was gaining some momentum. In addition, Symponia's managing director, Janet Davies cautions, "I'm not sure there's enough in print for anyone to really know what's gone on." That is one of the key lessons we should learn.

So what have we seen in print so far? We've heard about how these elderly clients were lured into gambling their life savings on "risky investments." This suggests the investment bonds sold were dodgy - the problem here, as financial advisers well know, was not with the bonds, which are widely and successfully used to fund care, but with the internal, advisory processes.

As Davies says: "Investment bonds are not the devil." They can be used for elderly clients, as long as the client or their family are well aware they were locking away their money for five years and would be subject to heavy penalties for early withdrawal of funds. The issue is that NHFA was not profiling their clients to see if they could adequately shoulder these risks.

In addition, headlines reporting NHFA preying on the elderly and dying could become engrained in the public eye, and damage people's perception of care advisers. We need to ensure people are made aware of how the advice process should work when they see an IFA. Under best practice, professional advisers ensure their clients and their families, are best placed to understand the advice given and are provided with a range of funding options to consider.

In addition, the 8% commission rates on the bonds were obscene, even more glaringly so in print. But instead of this narrow focus, there should be more coverage and clarity around how consumers can determine whether their adviser is truly independent and how charging structures will become more transparent in the future.

The blame game

And the politics of blame is another tricky issue. While a former NHFA salesman alleged: "NHFA was an extremely ethical company before the bank bought it" and claims the bank fuelled shady operations and the practice of targeting the elderly, HSBC have now planned to look at cases from the firm dating back to 1991. This could indicate not all was well in NHFA, long before HSBC's acquisition in 2005. All we know is that compliance was lacking, both within NHFA's ranks and its parent company, and we need more evidence to ascertain what happened. Hanifan said: "It's disappointing although this is headlined as the bank, NHFA were directly regulated for a huge amount of that time. I don't feel all the blame should go to HSBC."

Hanifan feels great sympathy for former employees of NHFA. "[the management] let down their independent financial advisers. They would have taken on people at different stages of expertise and skills, each of them would have required that mistakes they would have made would have been picked up: that protects the consumer and helps the development of the IFA. Although we had some members who participated in our pilot scheme when we first did it, NHFA put hardly of its members through for accreditation."

Perhaps outcomes could have been different if more advisers had taken industry exams. Consumers need to know that most care advisers have taken professional qualifications and are CRB checked, so there is little to fear from firms that have moved with the modern world.  But NHFA once defined best practice and had been around for years, so it may be difficult for many to feel anything for an organisation who should have known better.

And aside from looking at the impact on consumers, other financial advisers should not be put off by working in this area. The good guys of the care industry feel personally disappointed by what's gone on and I hope they do not get tarred by the same brush. What the industry should be doing off the back of negative press, is lobbying for tighter auditing for those who work with the elderly and more work around a code of conduct and qualifications for all. If more providers do enter the market in the wake of The White Paper, I wonder whether there could be a place for a SHIP- style industry body to oversee operations and ensure the public know what to expect from their advisers.

Funding long-term care is not just cannon fodder for the press - one in four of us will need care at some point.  The public need to know the positives as well as the negatives, especially when scandals raise their ugly heads.