Lloyds has admitted it wrongly advised a client to pull a six-figure sum out of a with profits fund and plough it into its own investment portfolio service.
Keith Thomson, director of investment services for Dundee-based IFA Blackadders, helped a client complain to the bank after an adviser who worked for Lloyds TSB Private Banking told them to switch from a Prudential product to its own investment service.
Mr Thomson identified clear holes in the advisers recommendation back in March yet initially Lloyds rejected the complaint.
Lloyds finally offered £15,000 compensation once the complaint was passed onto the Financial Ombudsman Service in September.
A spokesman for Lloyds insisted the decision to settle was because the bank received additional information - not because of the referral to the ombudsman.
Mr Thomson said it was clear that the Lloyds adviser did not take into account Prudential’s Prudence bond would be disregarded as being an asset under CRAG - unlike its own investment portfolio.
CRAG, or charging for residential accommodation guideline, means if the client required care and a claim was to be made to the local authority for the payment of such care, the free personal and medical care aside, the Prudential investment would have been disregarded as an assessable asset.
Mr Thomson also called into question why the adviser indicated as a reason for switching on the fact find that the client did not require capital protection and they wanted an investment that “can continue without the need to renew after a set term and where the potential for growth is not capped”.
He said there was no renewal term on the Prudential with profits investment and the growth potential was technically not capped.
Mr Thomson said: “The final result was that the bond would have grown to £132,000 by October 2011 while the Lloyds portfolio had fallen to £116,000 approx – so much for a cautious investment.”
A Lloyds Banking Group spokesperson said: “We are sorry that after reviewing this case in light of all the evidence, we concluded that we did not give the right advice to this customer.
“We do have robust regulated sales processes in place for these products. So it is disappointing that we did not live up to our customer’s expectations on this occasion.
“The customer accepted our offer of compensation in September 2011.”