In a close parallel with a case I took to the Financial Ombudsman Service, it was reported last week that Lloyds TSB were required by the FOS to compensate an 87 year old widow with no investment experience to whom the bank sold a balanced fund, Discovery Solutions, in an expensive investment bond wrapper. My client, though somewhat younger, had been sold the same investment after selling her home to release capital she needed to spend to supplement her pension. In each case, if these retirement spending planning decisions had involved more closely-regulated pension products, Lloyds would never have dared sell risky investments, even though the principles of suitability are identical. How the bank has the gall to defend their salesmen’s actions in these cases beggars belief.

More depressing reading in Saturday’s Times: St James’s Place, the financial services retailer most misunderstood by its apparently affluent and educated customers, has chosen to takes its chances with the FOS rather than offer compensation to an 80 year old who lost £70,000 on an investment (also in a high-commission bond wrapper) of £216,000 (’the majority of her life savings’).

If the FSA can’t regulate misselling, why don’t the public? Shouldn’t reputation risk get the job done? Why it doesn’t is the most depressing thing of all.

TAGS: Commissions, misselling, regulation