Trial and Retribution: HSBC's record fine for malpractice

HSBC’s record £10.5 million fine for duping vulnerable pensioners into investing in long-term risky investment products could reflect endemic problems within the financial system.

2011 has been an exceptionally poor year for banking practice towards the elderly. Barclays, Norwich & Peterborough Building Society, and the Bank of Scotland were all fined millions of pounds in the first half of the year. Collectively, Barclays and Norwich & Peterborough were required to pay over £100 million in compensation to elderly customers who were misadvised and mis-sold risky investment products. HSBC have now been landed with an order to repay £29.3 million in compensation to elderly victims.

What makes HSBC’s case particularly galling is that the centre of the scandal falls upon the Nursing Homes Fees Agency (NHFA), a now-defunct subsidiary which was the UK’s leading supplier of advice on long-term care products. That HSBC felt the need to report its own company shows how irrefutable the malpractice must have been.

The Financial Services Authority ruled that a staggering 90% of the NHFA's recommeded long-term investment bonds and options were mis-sold between 2005 and 2010. Clients with an average age of 83 were encouraged to invest six-figure sums of their savings for five years or more to fund their care, even when it was evident that they were unlikely to survive the investment term.

The scale of the NHFA’s mis-service since its inception in 1991, then, is difficult to imagine. To further accentuate the problem, the NHFA was recommended by charities including Help the Aged, who, according to Money Mail, would receive commission for passing on names of elderly people who had contacted their helpline.

Janet Morrison, Chief Executive of Independent Age, said: "It is distressing to find out that a leading supplier of independent financial advice on long-term care has failed to provide a reputable service to some of the most vulnerable in society. We welcome the regulator taking action to fine those responsible."

Nobody in the business of marketing financial products should be exempt from addressing the crisis of confidence that such revelations incur.

At Which4U, we endeavour to make it abundantly clear where risk is involved, and give the clearest possible indication of where your capital is not fully protected. We also list many safe and secure savings options. Moreover, we openly recommend that independent financial advice is taken where you are not absolutely sure of your best options. If there are ways we could be more transparent in our listings, we would be glad to hear from you.

Keith McDonald
Which4U Editor