Tony Hazell: NHFA shows failure of commission model

While some have tried to paint this as another bank mis-selling problem, it is anything but. These sales were mainly made by self-employed IFAs used by Nursing Home Fees Agency and largely paid by commission. We have become all too familiar with stories of mis-selling but there was something especially repugnant about this case.

Elderly people, with an average age of 83, some of whom were in nursing homes were persuaded to invest an average £115,000 in long-term bonds with onerous early redemption penalties. No thought was given to risk, balance or the need for access.

Those who choose to pick over the bones of the dying deserve a special sort of opprobrium. The Nursing Home Fees Agency was an IFA which started in 1991 and retained its IFA status and operational independence after it was taken over by HSBC in 2005.

Its target audience was elderly people who needed advice on care home fees.

This was an extremely vulnerable group yet the so-called advisers operated on a largely commission basis. NHFA had 60 per cent of the market.

It paid Help The Aged for leads, was regularly quoted in the press and appeared on both the Royal British Legion and government websites.

Given the extreme vulnerability of its clients you might have expected it would come in for special attention from the FSA.

Yet, it was HSBC that spotted the mis-selling during a business reorganisation in 2009. What in heaven’s name was the regulator doing in the previous four years during visits made to NHFA?

Did these IFAs turn rogue the minute the firm was bought by HSBC or was mis-selling already endemic? We do not know yet because the FSA investigation only goes back to 2005.

What we do know is that the management was unchanged.

If there was already mis-selling this raises questions of HSBC. Surely when buying this company it looked at the business it was doing? What happened to due diligence?

How was NHFA allowed to operate within an accounting division without compliance for so long? And what are those IFAs doing now?

The other question that everyone should now be asking is whether more of this mis-selling is going on? Nine out of 10 of the investment bond sales investigated at NHFA were bad ones.

Does the mis-selling stop there? I do not believe it does and neither, I suspect, does the FSA. If you have been up to no good in this area – watch out. The day when you will have to account for your actions is nigh.

Into a tailspin

I cannot think of a worse time in my lifetime (which spans more than half a century) to be approaching retirement.

Aviva’s latest Real Retirement Report says savings and investments among the over 55 have plunged by 27 per cent in the past year to a pitiful average of £11,153.

Meanwhile debts have grown to £21,901 from £19,878. Those with mortgages owe an average £80,849. With those debts retirement plans must surely remain on hold.