HSBC have completely hoodwinked me !!

Rhino666

About 5 years ago when my TOISA matured I was looking for a new home for it. The HSBC performance plus ISA looked like a good product - protection of capital and linked to the rise is the FTSE. At the time I assumed from the wording in the information leaflets that the link was direct ie. my interest would be calculated on the basis of the change in stockmarket over the full five year period. This investment seemed similar to a number of others available at the time with the added bonus of capital protection.

When I recently enquired about maturity proceeds due shortly I was astounded to be told that the investment interest would be capped at 50% of the rise of the FTSE and would be exactly half of what I expected. I would never have entertained such a poor investment if I had known the details which were clearly non existant or hidden. I have since read through the entire folder of information/accounts sent over the last five years and there is no reference to the 50% cap. The original T&C's say 'after five years, you will have an interest payment linked to the performance of the FTSE 100 index. You can find details of this link on the form enclosed at the back of this brochure' - needless to say the form was missing !! The annual investment report which cover all HSBC accounts as well as documenting the market has a small column on one line detailing the maximum return for this account as 150%.

I am not stupid and feel completely ripped off and manipulated. The account information was clearly designed to hoodwink and mislead. The vital piece of information which presumably happened to mention that the link 'performance plus' to the stockmarket meant only a 50% slice was conveniently missing.

Is there anything I can do to get some compensation for this sharp practice. Apart from losing money, I have lost that money in my tax free wrapper. I have complained directly to the HSBC with no response as yet - the investment matures on 10th May.

Thanks and sorry for the ramble

Rob

dunstonh

Is there anything I can do to get some compensation for this sharp practice.

The fact the product is rubbish is not grounds for complaint. You expect poor quality products from the banks.

If you were given the wrong literature for the product chosen, then that would be. Although that would be an unusual error.

However, it wouldnt make a difference if there was a 50% cap or not. I have just checked the HSBC library and it shows that the FTSE100 for this tranche would have been around 5295 at the start. The FTSE100 hasnt grown by anywhere near 50%. You would be looking at around 18% growth in that time. So a complaint about whether a 50% cap existed or not wouldnt make the slightest bit of difference when the growth is 18-20%

Apart from losing money, I have lost that money in my tax free wrapper.

You haven't lost any money and you haven't lost your ISA status. So, again, no grounds for complaint.

Cannon_Fodder

My reading of this is that 50% means half OF the change in the FTSE...

...so "50% of the rise" - would mean 9-10% of the 18-20% change in the FTSE.

Rather than, "upto 50%" meaning a % change IN the FTSE...


However, having protection and full FTSE growth sounds unlikely, as they'd want you to pay for the protection in some fashion...


But if you think the documentation is misleading, it could be worth a letter to their complaints department, then onto the Ombudsman for an opinion if no joy.

Rhino666

dunstonh - thanks for the reply as usual.

I have just phoned the HSBC, as they have not replied to my complaint.

It seems that the girl I spoke to about the maturity proceeds had got her facts completely wrong and I did ask her to repeat herself to make sure I had heard correctly.

The 50% mentioned is a cap on the total interest payable and obviously does not apply here. I will get 100% of the averaged rise of the FTSE over the final 12 months compared to the strike figure when the cash was first invested on 6/3/02 of 5188.

I am very relieved to have got this confusion sorted.

dunstonh

I've just looked at it the library again. I had assumed from the post it was x% with a cap of 50% from what had been said. However, the tranche is slightly different to that:

Key features of the account:
• The tax efficient status of your existing account is retained
• Guaranteed† to return your capital in full, at maturity
• Premium income on 50% of your investment, which will exceed the Bank of England base rate at all times.
Income can be withdrawn on a monthly basis or rolled up until maturity with options for access to your capital
built in††
• Potential interest at maturity on the remaining 50%, linked to any growth of the FTSE 100 Index.

Both tranche 12 and 13 have the following data:
[php]
Performance Plus ISA
version start date tracked index max return FTSE entry maturity date
Issue 12 (TOISA) 08/03/2002 FTSE 100 50% 5295.25 08/03/2007
Issue 13 (TOISA) 10/05/2002 FTSE 100 50% 5188.65 07/10/2007[/php]

So, half the money tracks the FTSE100 at 100% tracking. Hence maximum return of 50% of FTSE 100 performance on whole amount invested.

The documents are correct and I'm afraid it is you misreading the information. To put it another way:

You invested your money and half of it tracked the FTSE100 and half of it was linked to above base rate. Hence the 50%.

Naff product as I said earlier but the information is correct and they do appear to be giving you what you are entitled to.

I have read copies of the maturity letter that you have or will be getting and it shows 13.56% for the half that was tracking the FTSE100.

Rhino666

Donstonh - most of the above is news to me as I can only quote from the information received over the last five years. My original performance plus ISA reference document has reference 5123/MC/1001EY/40.

There is no mention of splits and even the tranche number is nowhere to be seen. HSBC have not inspired confidence here and even their operative on the phone this morning was struggling to extract the correct info on this investment. I'm no genius but if the lack of info and apparent complexity of this product has confused me then I would question the HSBC's ability to deal with the general public with such products.

The last valuation I received was £10673.22 on 5/4/06 which represents an 11.57% premium on the £9566.17 invested.

I am hoping that the maturity payout will be a nice surprise :-)

dunstonh

I obviously dont have access to your personal data but the HSBC library shows the pre maturity and post maturity letter template. It does state that the 13.56% is based on a value at a specific date and it may differ slightly depending on when you invested (tranches tend to go on over a period of 3 months).

A copy can be found at this link:
http://www.hsbcinvestments.co.uk/site/media/pdf/professional_advisers/structured_products/investor_post_maturity12.pdf

Rhino666

Thanks for that - seems to indicate that tranche 12 was linked wholly to the performance of the FTSE 100. I am fairly sure that mine is tranche 13, because of the maturity date - 10/5/07 - not that there is any difference as the strike date is personal and the T&C's are exactly the same according to the HSBC bod.

The extra couple of months where the FTSE was at higher levels may see the payout as high as 17% - wow. Very poor for a 5 year investment but could have been worse. Presumably a UK unit trust would have done about the same over the same period ?

dunstonh

When they issue tranches they sometimes have options. If yours is wholly linked, then that could be an option you exercised at the time.

Very poor for a 5 year investment but could have been worse. Presumably a UK unit trust would have done about the same over the same period ?

Afraid not. Most of my portfolios are running at close to double original investment. Some just above, some just below.

The FTSE100 has been a weak index to track for some time. If you had picked a bog standard FTSE100 tracker for that period, your 9566 would be worth £12,611 (upto 30th March).

Picked a lower risk single uk equity income fund (not top performer but top half and one that would have been likely from 5 years ago) and that would be £17,711.

Dont dwell on hindsight though. Learn from it and dont make the same mistake again