Mischarged Trust Management Fees

edphill

Hi All,

This is quite unusual but hopefully I'm in the right part of the forums.

My grandmother died in 1999 and her estate passed to my grandfather, who died in 2003. HSBC managed the trust for many years before their deaths and it was closed after the death of my grandfather, with all money passing to my mother and aunt.

Completely out of the blue, we recently received a letter from HSBC saying they charged the wrong fees for a number of years (1979 - 2003) and now want to reimburse us.

They say they charged approx £30,000 for fees and should only have charged approx £4,500.

They are proposing the following compensation:
Reimbursement of fees = £25,500
Compensation for lost investment growth (1979-2003) = £6,200
Compensation for delay in making payment (1979-2003) = £11,600

They will also settle any tax liabilities that fall due with HMRC as a result of this.

I have three main questions:
1. Why has this suddenly come to light 10 years after the death of my grandfather, without any probing from us?

2. The compensation they have outlined seems generous but is that in accordance with usual amounts given for such events? They charged the wrong fees for 24 years!!! Surely that is negligent at least? We don't want to be greedy but if you view this as an unarranged overdraft (as they no doubt would if we had this debt sitting on account for years), the amount would almost certainly be much higher.

Any advice greatly appreciated.

Wywth

edphill wrote: »

Hi All,

This is quite unusual but hopefully I'm in the right part of the forums.

My grandmother died in 1999 and her estate passed to my grandfather, who died in 2003. HSBC managed the trust for many years before their deaths and it was closed after the death of my grandfather, with all money passing to my mother and aunt.

Completely out of the blue, we recently received a letter from HSBC saying they charged the wrong fees for a number of years (1979 - 2003) and now want to reimburse us.

They say they charged approx £30,000 for fees and should only have charged approx £4,500.

They are proposing the following compensation:
Reimbursement of fees = £25,500
Compensation for lost investment growth (1979-2003) = £6,200
Compensation for delay in making payment (1979-2003) = £11,600

They will also settle any tax liabilities that fall due with HMRC as a result of this.

I have three main questions:
1. Why has this suddenly come to light 10 years after the death of my grandfather, without any probing from us?

2. The compensation they have outlined seems generous but is that in accordance with usual amounts given for such events? They charged the wrong fees for 24 years!!! Surely that is negligent at least? We don't want to be greedy but if you view this as an unarranged overdraft (as they no doubt would if we had this debt sitting on account for years), the amount would almost certainly be much higher.

Any advice greatly appreciated.

Probably came to light as a result of either others, or due to their own internal auditing procedures.

As you say, the compensation seems generous, but I presume it has been calculated on a standard scale

If you'd have borrowed the money from Wonga (had they been around 24 years ago), the amount would be higher still ... but I'm not sure what that has to do with the price of fish.

You are being compensated for lack of investment growth and delay in making the payment, not the cost of borrowing money. This is quite normal.

dunstonh

1. Why has this suddenly come to light 10 years after the death of my grandfather, without any probing from us?

Probably found the error during IT upgrades or through someone else. They then have a responsibility to correct everyone corrected.

2. The compensation they have outlined seems generous but is that in accordance with usual amounts given for such events?

The requirement would be to refund the charge and apply an appropriate interest rate.

They charged the wrong fees for 24 years!!! Surely that is negligent at least?

Yes it is. However, that is nothing to do with you. That is between them and the FCA. Your bit is the correction.

We don't want to be greedy but if you view this as an unarranged overdraft (as they no doubt would if we had this debt sitting on account for years), the amount would almost certainly be much higher.

It cannot be viewed as an unapproved overdraft. It was a clerical error. Very different.

jamesd

Since this was a trust I wonder how the compensation for lost investment growth is calculated and whether it matches the actual investment returns of the trust while it was being managed by them. Assuming that fees came out of the trust.

edphill

All,

Many thanks for your kind responses. So is the best thing to do just to accept the payment they're proposing, or is it worth querying / further investigating / reporting to the FCA? Sorry but in this day and age it's difficult to accept anything on face value from the banks! Which is why MSE was the natural place to ask.

Also, the trust was in existence for decades before 1979. I'm guessing 1979 was when they started charging the wrong amount but have no proof of that. Is it worth asking HSBC to clarify exactly how they have worked this all out and for a schedule of fees since the trust was opened with them (pre-HSBC)?

Could it be worth seeking legal advice on this or would it just likely result in a bit legal bill and the same amount from HSBC?

Thank you again for all your help.

dunstonh

or is it worth querying / further investigating / reporting to the FCA?

The FCA do not handle consumer complaints. They will refer you back to the internal complaints procedure of the firm.

What is there to investigate further? What exactly is it that you feel is wrong with the figures?

Is it worth asking HSBC to clarify exactly how they have worked this all out and for a schedule of fees since the trust was opened with them (pre-HSBC)?

You can do. However, you are likely to end up with a non-consumer friendly list of figures. They may also charge for such a thing as well as the trustees should have that information to hand from what has already been supplied.

Could it be worth seeking legal advice on this or would it just likely result in a bit legal bill and the same amount from HSBC?

Almost certainly the amount will remain the same. Whilst possible, you are effectively indicating they have made an error in correcting the error. The odds of that are likely to be low (but possible). Any legal costs would have to be paid for by you. The process does not allow you to claim the costs back from the firm.

The whole thing really comes down to you indicating why you think the figure is wrong.

bronson22

Hi i hope some one can help us!!!!
we sold our house in france and transfered the money in november 2012 to RBS and they have lost the money it is a huge amount of 700000 euros and we keep being promised that it will be in our account, this has been going on now for over 6 months now!!

we have contacted the finacial onbubsman and they have been dealing with it for about 4 months with no joy!!!!!
we need help as have no money and very streesed
thanks

dunstonh

bronson22 wrote: »

Hi i hope some one can help us!!!!
we sold our house in france and transfered the money in november 2012 to RBS and they have lost the money it is a huge amount of 700000 euros and we keep being promised that it will be in our account, this has been going on now for over 6 months now!!

we have contacted the finacial onbubsman and they have been dealing with it for about 4 months with no joy!!!!!
we need help as have no money and very streesed
thanks

bronson, please create your own thread. You can copy and paste your post into that to save you retyping. It isnt fair on the original poster for you to post an unrelated question to their thread (it is known as thread hijacking). It can lead to you taking over their thread leaving their questions and issues unanswered or swamped by your subject.

jamesd

Not legal advice, but asking how the returns used in calculating the investment growth correlate with the returns of investments within the trust may be of use.

I'm troubled by the compensation for investment growth figure. If that fee stayed the same except growing with inflation over the years it would have been £459 in the first year and £1471 in the last. The investment returns that produce £6200 of growth on that stream of payments is only 1.94%, without any inflation component as part of that number (not a "real", meaning inflation-adjusted, return). If all they had done was match RPI inflation it would have been about £13125. The "real" investment return (inflation adjusted) seems to have been about -1.55%.

You can probably trust that they got the fee correction right and the delay payment right for the other two amounts right as well. Which seems to leave the investment growth rate that seems rather low for the amount and periods involved and could also make the delay part too low.

Or looking more broadly, I'm wondering whether the compensation for investment returns part might lead to some interesting revelations about how well or otherwise the money was managed and whether there was some other competent person besides HSBC looking at how well or otherwise HSBC was managing the money.

I accepted many approximations in my calculations (like assuming level fee except for inflation) so I wonder if they used a compound interest rate of 2% for the investment returns, ignoring inflation and how the money was actually invested. I also assumed that the value of the investments wasn't a factor in how much was charged, which doesn't seem likely. So huge approximations in my calculations, but still the numbers appear interesting enough to prompt asking for more information about that calculation. Definitely don't take major action based on numbers with such huge approximations. You need more detail about what the fees were and how the investment returns were calculated before it's anywhere even remotely close to where it needs to be to be doing more than asking.