Vulnerable elderly people were mis-sold unsuitable investment policies over five years by advisers working for high-street bank HSBC, it was revealed yesterday. The City Watchdog has issued a record retail fine of £10.5m but HSBC's bill will actually be £40m, after it was also ordered to hand over £29m in compensation.
The Financial Services Authority said some 2,485 people were mis-sold investments by advisers from the Nursing Home Fees Agency (NHFA) between 2005 and 2010. HSBC had bought the advice firm in 2005 and closed it in July this year.
The country's leading older person's charity Age UK admitted it had accepted fees from NHFA for introducing people to the adviser. The charity said it is urgently checking its files to find out of any of its customers have been affected.
The FSA said the advice given by NHFA staff was unsuitable because many of the people affected – average age 83 – had a life expectancy that was less than the recommended length of the investment.
As a result, when they had to withdraw cash to pay for care, they were hit by penalty charges, meaning their cash shrank much more quickly than if they had received the right investment advice.
The Watchdog said NHFA had not considered the individual needs of its elderly customers and failed in many cases to recommend suitable products, such as higher fixed interest rate savings accounts and ISAs. They also failed to consider the tax status of customers before making a recommendation.
HSBC said it will be contacting customers of NHFA in the next few weeks. Brian Robertson, chief executive of the bank, said: "NHFA failed to give suitable financial advice to some of its customers. This should not have happened, and I am profoundly sorry that it did.
"I guarantee that every customer who is found to have not been treated fairly will not be disadvantaged."