Vulnerable elderly people were mis-sold unsuitable investment policies over five years by advisers working for the high street bank HSBC, it was revealed yesterday. The City Watchdog has imposed a record fine of £10.5m but the bill will actually be £40m after the bank was 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 company in 2005 and closed it in July this year.
The country's leading older persons' charity, Age UK, admitted it had accepted fees from NHFA for introducing potential customers. The charity said it was urgently checking its files to find out if any of its customers had been affected.
The FSA said the advice given by NHFA staff was unsuitable because many of the people affected – with an average age of 83 – had a life expectancy 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 charges, meaning their cash shrank much more quickly than if they had received the right 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-rate savings accounts and ISAs. They also failed to consider the tax status of customers before making a recommendation.
Tracey McDermott, the acting director of enforcement and financial crime at the FSA, said: "NHFA was trusted by its vulnerable and elderly customers. It breached that trust to sell them unsuitable products."
HSBC said it would contact customers of NHFA in the next few weeks. Brian Robertson, the 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."
Age UK – created from a merger between Help The Aged and Age Concern – had a financial relationship with NHFA from 2003 until 2009.
Yesterday it distanced itself from the mis-selling scandal. Michelle Mitchell, the charity director of Age UK, said: "Help the Aged did not advise potential customers or have any input in investment decisions.
"NHFA were a major adviser in the area of funding care home fees and were trusted by many including Help the Aged. We are urgently reviewing the findings to see if today's announcement affects Help the Aged customers and how we can help them access compensation from HSBC."
Ros Altmann, the director general of Saga, said: "It is so distressing to see yet another large bank being found guilty of taking unfair financial advantage of trusting elderly people. One has to wonder how many such scandals have to occur before the regulator acts to prevent them happening in the first place rather than trying to sweep up the after-effects."Reuse content