Investment account defended by society

A SUFFOLK independent financial adviser yesterday staged a one-man protest against allegedly unfair sales tactics by banks and building societies.

Peter Herd of Essential IFA, based on Ransomes Europark in Ipswich, believes that high street institutions are being allowed to make potentially misleading claims about the likely returns from some investment products.

In contrast, he says, independent financial advisers have to comply with more rigorously-applied requirements when recommending products to clients.

They also have to contribute, through a levy, to an industry compensation scheme despite, he says, not being responsible for most instances of mis-selling.

Mr Herd staged his protest outside the Ipswich office of the Chelsea Building Society which is currently displaying posters advertising an 18% return on its six-year Protected Capital Account, which offers the possibility of higher returns based on the performance of the stock market.


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He claims that the poster is potentially misleading, with the minimum guaranteed return of 18% representing an annual equivalent rate (APR) of only 2.79% – less than that available on some more conventional savings accounts.

“The FSA says that adverts should not be misleading,” he said. “I would argue that rolling up the interest for the whole six-year term is misleading.”

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Mr Herd, who gathered signatures on a petition in support of his campaign during yesterday’s protest, said he also objected to the Protected Capital Account terms quoting maximum return of 60% (8.14% APR).

He claims that the sustained growth in the stock market required for the full 60% to be achieved is, in reality, highly unlikely to occur.

A spokeswoman for the Yorkshire Building Society, of which the Chelsea is now part following a merger, said the potential 60% return was not used to promote the product but the society was obliged to quote the figure within its terms as returns were capped at this level.

The 18% figure was quoted because the product was a term account, with interest being paid at the end of the term, and 18% gross was the minimum return.

“All our marketing materials are reviewed for compliance with the Financial Services Authority’s (FSA) financial promotions criteria,” said the spokeswoman. “In addition, we also adhere to the FSA’s guidelines for the marketing of this type of account.”

She added: “Our Protected Capital Account is part of our overall range of savings/investment products.

“It has proven to appeal to those wishing to realise potential growth greater than that possible in other deposit accounts, but who are unwilling to put their capital at risk by directly investing in stocks and shares.

“We regularly seek feedback from customers who buy any of our products or services and the most recent feedback on this product, completed this month, concluded that 98% understood the features of the product, 97% agreed the literature was clear and understandable and 97% understood how the product worked.”

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