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Lloyds TSB in row over advice segmentation

A former Lloyds TSB adviser is looking to challenge the advice model previously used by the bank.

Whistleblower Ian Taplin has renewed his call for the FCA to take action over alleged segmentation of advice at Lloyds TSB, which he claims caused disparity in the service the bank’s customers received.

The complaint revolves around segmentation of the bank’s client base. It is alleged high net worth customers were placed into whole-of-market advice programme, while lower earners were offered a restricted range of products.

Mr Taplin, who previously operated as an IFA, joined the bank in 2005 and says he discovered a system of segmenting clients according to their worth.

According to Mr Taplin, those who held up to £100,000 in investable assets were automatically labelled as mass market, and only given access to a limited range from tied advisers. Those with between £100,000 and £250,000, and with an income up to £60,000pa were classified as ‘mass affluent’ and allowed access to a broader range.

Meanwhile ‘Wealth’ customers, with over £250,000 of investable assets and £60,000 annual salary were singled out for whole-of-market advice, including will advice, a discretionary portfolio service and long term care advice.

No client was expected to pay for any level of service.

Mr Taplin says the segmentation was revised in 2007 to separate clients into two tranches, effectively merging the top two tiers into one, before the programme was stopped completely in 2010.

Under the scheme, Mr Taplin claims ‘Wealth’ clients could be sold protection products and critical illness plans from a range of providers, while lower earners were limited to Scottish Widows products.

According to figures from Money Management’s critical illness survey from December 2006, which collated premiums for a decreasing term assurance policy covering a non-smoking couple, male aged 40 and female aged 36 for a £100,000 mortgage, Scottish Widows premiums were £271.35pm, well above the average and well above the cheapest – Scottish Equitable at £205.45pm.

This disparity means, in that example, mass market clients were potentially paying a total of £19,770 more than ‘Wealth’ customer over the mortgage’s 25-year term, purely as a result of the bank’s decision to restrict the products available.

Mr Taplin also claims that advisers were offered different incentives depending on which tranche of client they were serving.

The claims have previously been heard by the FCA, which took more than a year before rejecting them in December last year, but Mr Taplin has now secured another FCA meeting following intervention from his MP, Theresa May, and will travel to Canary Wharf on 20 November, along with two other whistleblowing witnesses who have sought anonymity.

A spokesperson for Lloyds said it would be inappropriate for it to comment further at this stage as the case is set for another hearing.

jon.cudby@ft.com