Mis-sold ISA

RedFraggle

Hi
My Mum was contacted recently by Lloyds in connection to her Scottish Widows investment ISA she took out in 2010 (£7000) which she topped up in March and April of 2012 (£5.680 and £5320). She was not made aware that the money needed to be there for 5 to 10 years to get the best return.
The options they have given her are:
1. Leave the money in
2. Surrender the product and they will give her whichever is higher out of the current surrender value £20,681 (waiving the early withdrawal fee) or £19,155.14 which is there calculated value of her position had she not made the investment.

Given that the money has already been sat there for a few years and she doesn't need immediate access to it is she best to leave it in for another 3 years rather than moving it? She can't really afford to lose it though so the fact that it's investment worries me a little.

I'm also inclined to think she should ask for a formal apology, there isn't a single sorry in the letter just a statement of fact and her options. I'm aware she won't get any monetary compensation, but mi-selling a financial product to a recently widowed pensioner is pretty low and I don't think a written apology is too much to ask!

Any thoughts or ideas as to where the money might be better off?
Thanks in advance

Your_Hero

I'm struggling to see how it could be mis-sold? Also she does not appear to be in a detrimental position either from the investment (not that this is relevant in terms of a complaint for mis-selling).

The ISA was done over 3 transactions and it's hard to believe that she would not have had the discussions about long term investments and the risks involved. She would also have received paperwork on each occasion.

She can cash out now and still be in profit so what exactly are you complaining about again? If she is scared about losing money then this is probably the thing to do. She could wait a few days until 1st July and transfer this to a Cash ISA and earn fixed interest instead. This would keep its ISA status.

Archi_Bald

Given the low interest rates we have been seeing for the last few years, £19,155.14 is roughly about what could have been made from the deposited amounts in the very best paying cash ISAs. £20,681 is obviously significantly better, so I am not sure why and what for Lloyds should apologise, and I can't see that anything has been mis-sold.

dunstonh

I'm struggling to see how it could be mis-sold? Also she does not appear to be in a detrimental position either from the investment (not that this is relevant in terms of a complaint for mis-selling).

A couple of banks and building societies have been doing past business reviews. In our area, N&P have been sending them out by the bucket load and paying an IFA £500 for seeing the client. In most cases, it is hard to see any wrongdoing but the person is still getting redress or options.

Lloyds have been doing this with some of their structured product sales.

She was not made aware that the money needed to be there for 5 to 10 years to get the best return.

Structured products, if this is what it is, have a defined timescale. Most for the last decade have been 6 years maximum term. So, not sure where 5-10 years comes from. The reason I believe it is a structured product is that is the only tie in investment Lloyds retailed for many years prior to closing their sales force.

2. Surrender the product and they will give her whichever is higher out of the current surrender value £20,681 (waiving the early withdrawal fee) or £19,155.14 which is there calculated value of her position had she not made the investment.

So, she is not worse off as the investment is worth more than what she had. its up to her whether to take the gains so far or leave it in for potentially greater returns until the maturity date.

She can't really afford to lose it though so the fact that it's investment worries me a little.

It would require Lloyds to fail for her to lose money (if it is a structured product).

I'm also inclined to think she should ask for a formal apology

What for? For offering her a get out now which allows her to take £1500 more than she would have had she not followed their advice?

there isn't a single sorry in the letter just a statement of fact and her options.

What do they have to apologise for? They are not saying anything is wrong. They are just giving an opt out if she wants it as part of a general review of past business.

but mi-selling a financial product to a recently widowed pensioner is pretty low and I don't think a written apology is too much to ask!

It may not have been mis-sold. They probably havent even reviewed it in that depth but are just offering a get out to avoid future complaints.

Your_Hero

dunstonh wrote: »

A couple of banks and building societies have been doing past business reviews. In our area, N&P have been sending them out by the bucket load and paying an IFA £500 for seeing the client. In most cases, it is hard to see any wrongdoing but the person is still getting redress or options.

Lloyds have been doing this with some of their structured product sales.

Interesting. I've not come across this yet.

I suppose with the compensation culture we are in, it makes sense to cut their losses short in case another round of FCA's thematic review hits them again.

RedFraggle

It was mis-sold because she was led to believe it was a 2 to 3 year investment not a 5 to 10 one. Mis- selling is failing to provide the correct information and selling a product that doesn't meet your needs. Compensation entitlement is related to whether or not the mis-selling has resulted in you being out of pocket. Something can be mis-sold without you being out of pocket.
She's been lucky, it's performed rather well.

She also didn't receive the paperwork she should have at the time the top ups were made which has been acknowledged by Lloyds.

If anyone would like to actually answer my question rather than debating the definition of mis-selling or the morals of whether or not it's acceptable to mislead a pensioner provided they do alright out of it in the end, then that'd be great.

Your_Hero

I've already answered your question in my first post if you'd like to re-read it. If she can't take the ups and downs on this investment and if it really does worry you that much, then she should transfer it into a fixed rate Cash ISA from July onwards.

bigadaj

RedFraggle wrote: »

It was mis-sold because she was led to believe it was a 2 to 3 year investment not a 5 to 10 one. Mis- selling is failing to provide the correct information and selling a product that doesn't meet your needs. Compensation entitlement is related to whether or not the mis-selling has resulted in you being out of pocket. Something can be mis-sold without you being out of pocket.
She's been lucky, it's performed rather well.

She also didn't receive the paperwork she should have at the time the top ups were made which has been acknowledged by Lloyds.

If anyone would like to actually answer my question rather than debating the definition of mis-selling or the morals of whether or not it's acceptable to mislead a pensioner provided they do alright out of it in the end, then that'd be great.

It's a reasonable point to debate and the irrelevant point about a formal apology has offset the topic.

Given that the investment doesn't seem to match her risk profile or needs then it seems an obvious solution, cash out now and take the additional profit that has accrued from the investment. Though logically she should be taking the lower value as that would match her risk profile in terms of not investing.

However it sounds as though she is very risk averse and so the realistic options for the monies is either a series of current accounts to get 3-5% interest with checking of terms and conditions and direct debts etc or 1-1.5% on normal savings accounts, ns&i being the easiest option.

dealer_wins

Lloyds have robust paperwork these days for all investments sold, and it is all stored centrally.

Everything discussed and signed by the customer will be written down, including risk warnings etc

atush

RedFraggle wrote: »

It was mis-sold because she was led to believe it was a 2 to 3 year investment not a 5 to 10 one. Mis- selling is failing to provide the correct information and selling a product that doesn't meet your needs. Compensation entitlement is related to whether or not the mis-selling has resulted in you being out of pocket. Something can be mis-sold without you being out of pocket.
She's been lucky, it's performed rather well.

She also didn't receive the paperwork she should have at the time the top ups were made which has been acknowledged by Lloyds.

If anyone would like to actually answer my question rather than debating the definition of mis-selling or the morals of whether or not it's acceptable to mislead a pensioner provided they do alright out of it in the end, then that'd be great.

It is good manners to read all the replies before getting upset and insulting.

What proof do you have that she was told it was 2-3 years?

Listen to the advice above, check the details but Lloyds would have to fail for her to loser her money on a structured product so I don't see the worry.

If worried you/she are, have her transfer it to a Cash ISA on tuesday or after (when the amt you can put into an ISA increases)

dunstonh

It was mis-sold because she was led to believe it was a 2 to 3 year investment not a 5 to 10 one.

Lloyds have not retailed a product with a 10 year tie in for over 25 years. So, what product is this 5-10 year one you refer to? As mentioned, the only tie in product that they had was a 6 year structured product (some of these had an early kick out option which could come in to play after 2 or 3 years).

Mis- selling is failing to provide the correct information and selling a product that doesn't meet your needs.

Yes. However, a perhaps more accurate description is where it has been shown to be mis-sold rather than you believing it may have been mis-sold. In these cases, there is what you believe happened, what they believe happened, what actually happened and what the evidence suggests may have happened.

Some people get redress and options where they were not aware of any wrong doing and in some cases money is paid out where there is no wrong doing. Others who should get paid out sometimes get nothing. So, the system sees winners and losers on both sides.

Compensation entitlement is related to whether or not the mis-selling has resulted in you being out of pocket.

And she isnt. So, not a problem.

If anyone would like to actually answer my question rather than debating the definition of mis-selling or the morals of whether or not it's acceptable to mislead a pensioner provided they do alright out of it in the end, then that'd be great.

already answered. She doesnt want any investment risk. So, she should take the penalty free withdrawal now and put it in a savings account or depoist based plan and suffer potential inflation risk and shortfall risk. And you did raise the point about a potential apology. So, responses on that point are fair and valid.