FSA launches inquiry into City Financial sales

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The Independent Online

City Financial Partners, the financial advisers owned by Lincoln National, the US insurer with a large presence in the UK, is being investigated by the regulator over claims that it has miss-sold endowments to customers.

City Financial Partners, the financial advisers owned by Lincoln National, the US insurer with a large presence in the UK, is being investigated by the regulator over claims that it has miss-sold endowments to customers.

The Financial Services Authority (FSA) is examining the company, which has more than 300,000 customers and only sells Lincoln products, following an under-cover investigation by the Consumers' Association.

The Consumers' Association said City Financial was guilty of "lying to potential customers, sales tactics reminiscent of pre-regulation days and possible miss-selling".

It pin-pointed 10-year endowment investments, called Maximum Savings Plans and Maximum Investment Plans, as having been sold to the wrong groups of people in some cases. It also said certain City Financial staff had been "intimidating and unpleasant" to Consumers Association employees who carried out a mystery shopping exercise with the advisers.

The findings, published in the consumer magazine Which?, also say City Financial advisers have tried to stop customers taking away literature about the products they are buying.

City Financial last night said it was carrying out its own investigation, and said any staff who are found to have sold endowments in the wrong way may be sacked.

A spokesman for City Financial's parent Lincoln, said: "We take the allegations very seriously and are taking immediate action. We have a very good disciplinary record and dismissing certain staff would be one option." He added: "We do not believe the problem is endemic, but rather isolated incidents."

However, the Consumers' Association said the case highlighted shortcomings across the industry. A spokeswoman for the Consumers' Association said: "City Financial is tied to Lincoln but very few people understand it is not an independent financial advisers group."

The investigation also criticised City Financial's structure of paying advisers on a commission-only basis. This practice, the Consumers' Association said, encouraged staff to go for the hard sell, leading to cases where products were sold to inappropriate people.

City Financial has been allowed to continue to look after 1 million polices for its customers while the FSA investigation is underway. However, it is not open for new business because Lincoln is moving out of the UK insurance market. As part of the process, its staff, including some City Financial personnel, are being transferred to the independent financial adviser network Inter- Alliance.

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