MSE News: Barclays to pay £60m compensation for investment mis-selling

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  • chudies
    chudies Posts: 262 Forumite
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    dunstonh wrote: »
    I wasnt surprised by the redress they have had to pay as that was inevitable for such a basic error. The level of the fine was the main news for me as it was far higher than the normal 1-2 million that you normally see. Suggesting the issues at Barclays were wider than just an incorrect risk profile being applied to the fund..

    This was in fact the highest fine levied against a firm by the FSA for retail failings.

    One of the key issues why the fine was so high was that Barclays knew about the identified potentially unsuitable sales BUT then failed to act appropriately - hence the fine is so high to remind others/deter others from not falling in to the same trap .
    :grouphug: Lets hug!! :grouphug:
  • rickbonar
    rickbonar Posts: 448 Forumite
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    I know someone that nearly signed up to one of these schemes but with a different bank.

    A stark warning to anyone NEVER to sign up to any of these "investments"

    Mind you I think if it was a member of my family I would like to take personal remunerative action ..... ie. kidnap the head of the bank or fund manager and offer him the choice of my families money back or his hands and feet.
  • dunstonh
    dunstonh Posts: 116,649 Forumite
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    I know someone that nearly signed up to one of these schemes but with a different bank.

    There was nothing generically wrong with the "scheme". It was Barclays getting the risk profile wrong. If the risk profile had been right then there would be no case.

    I can imagine Aviva are fuming as its their fund that gets mentioned and people often make the mistake of blaming the provider when they have done no wrong when its the salesforce (or its management in this case that spoon feeds the low skilled sales reps).
    A stark warning to anyone NEVER to sign up to any of these "investments"

    What do you do with your money instead if you dont use investments? Sure, don't use the banks but not using investments seems a bit extreme.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • chudies
    chudies Posts: 262 Forumite
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    Was the fine really that high?

    Barclays invested £692m probably @7.5% commission - so the fine represents 15% of what they earned on the sales.
    I think most IFAs would be delighted if they has acted with such gross neglience/incompetence and only got fined 15% of the commission earned.
    ;)

    i didnt say i agree with the fine - :beer:

    as far as my opinion counts, i think the fsa/other bodies should be have fines 10x current levels - this is the only way organisations may listen!
    :grouphug: Lets hug!! :grouphug:
  • dunstonh
    dunstonh Posts: 116,649 Forumite
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    Barclays have just announced that they are closing their salesforce.

    http://www.citywire.co.uk/new-model-adviser/barclays-financial-planning-arm-to-close/a466159?ref=new-model-adviser-latest-news-list

    Whilst this fine and redress won't have helped, it does indicate that the big players don't see a future in providing full advice post RDR (retail distribution review). Personally, I didnt think they would pull out altogether but go down the restricted advice route. Pulling out of providing advice altogether was a surprise. Although logical given the remuneration is likely to be lower in future, training and compliance far more expensive and time consuming and consumer protection is ever increasing (to a point where it is almost not affordable to offer advice any more).
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • dunstonh
    dunstonh Posts: 116,649 Forumite
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    Couldnt they have just changed their "cost of services" to say their fee was 7% of the amount invested instead of their commission being 7% of the amount invested, and just carried on as before. Or perhaps someone has pointed out the the top brass at Barclays that once their salesman/women will actually have to disclose the upfront cost to the client that the sale might be a tad harder.

    Did banks still have that anomly where they only had to show a "cost of advice" figure based on estimated remuneration for that particular staff member? I know they used to but not sure if that was the case any more. They used to get away with the bank keeping the 7% (or whatever) but showing the cost of advice at around 2% as that is what the member of staff may have been costed at.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • jo2757_2
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    Hi,
    This is my first post. Don't know anything about finance so hoping somebody can help me.
    Trying to help my parents out with a complaint to barclays, they invested some money with barclays in 2006 and lost a whole load of money. After reading recent press I assumed it would be the aviva investments that they had put their money in to. But on reading their paper work it turns out that the investment was a legal and general cautious portfolio.
    Can anybody tell me if this is the same/similar scheme as the aviva investments?
    Thanks :)
  • dunstonh
    dunstonh Posts: 116,649 Forumite
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    Can anybody tell me if this is the same/similar scheme as the aviva investments?

    No. There was nothing wrong with the aviva investments. Barclays just incorrectly risk graded it as cautious when it was not. Your parents had a cautious portfolio which is designed for cautious investors. That risk rating was fine.
    Trying to help my parents out with a complaint to barclays, they invested some money with barclays in 2006 and lost a whole load of money.

    2006 wasnt a great time to invest with hindsight but after the losses of late 2007 to early 2009, the period after that has seen them recover and return to profit in most cases (often a lot more into profit with cautious portfolios). In the L&G cautious fund (barclays versions) the fund lost less than 25% (so not much) from highest point to lowest point and irrespective of the point invested in 2006, it would now be in profit. So, how have your parents lost a whole load of money?
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • jo2757_2
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    Thank you.
    Yes they did stress at the time of investing that they wanted something safe as it was there retirement money. When they realised they were loosing money they met with the sales advisor to complain that they had been ill advised. The sales advisor said 'sorry, we weren't expecting this to happen.' My father the asked for the worst case scenario on his investment and was told they could be looking at £24,000 from initial investment of £42,000. My parents are were obviously very afraid by this and withdrew the funds. I believe they were miss-sold this investment and as a direct result of Barclays incompetence and have suffered a financial loss.
  • dunstonh
    dunstonh Posts: 116,649 Forumite
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    jo2757 wrote: »
    Thank you.
    Yes they did stress at the time of investing that they wanted something safe as it was there retirement money. When they realised they were loosing money they met with the sales advisor to complain that they had been ill advised. The sales advisor said 'sorry, we weren't expecting this to happen.' My father the asked for the worst case scenario on his investment and was told they could be looking at £24,000 from initial investment of £42,000. My parents are were obviously very afraid by this and withdrew the funds. I believe they were miss-sold this investment and as a direct result of Barclays incompetence and have suffered a financial loss.

    What was their definition of safe?

    Safe as in cash only (but subject to real terms loss due to inflation and possible shortfall risk) or a low level of risk taken?

    Obviously withdrawing it was the wrong thing to do as they would not be in a loss now. However, Barclays would not be responsible for that decision. They are only responsible for the advice given at the time.

    Did you parents have any history of investing in the past (e.g. endowments, shares, insurance agent arranged policies, pensions etc)?

    How much of their money was invested compared to how much they had cash savings left?

    There is potential for mis-sale but making a short term loss is not grounds in itself. If the recommendation is consistent with the documented information and appropriate then a complaint can be rejected. If a fault is found in the advice then that can lead to the complaint being upheld.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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