This article looks at how bonds may have been mi-sold, and how customers can seek compensation. The Financial Ombudsman seems to have been dealing with a number of mis-sold investment bond cases recently, and it looks likely that there will be a few more in the pipeline yet. Recent headlines covered the record bond compensation that HSBC was ordered to pay out following the poor sales practices of one of its subsidiaries, and nearly every week seems to reveal another company with problems. The rules around whether a product has been mis-sold, and therefore whether any investor has a right to compensation, aren’t straightforward, which shouldn’t be a surprise when you consider all the regulations that have been put in place around them, but there are a couple of guiding principles that should let you assess whether you might have a claim. These are explained below, and you should also bear them in mind if you are considering taking out any new investments as they might just prevent you becoming a victim of mis-selling.
Were your wishes taken into account? When you made the investment, were you asked about your reasons for investing? You should have been, as it enables the adviser to get a full picture of your financial situation and your aims, and therefore allow them to recommend a suitable product. If you said you wanted a tax efficient investment, for example, you should have been pointed towards ISA’s to begin with. If you stated that you wanted a low risk home for your money, then you should not have had a volatile, stock market linked bond sold to you.
Was the term suitable?
Many bonds work on the principal that you are locking away the money for a period of time, often 5 years or more, and you’ll have to pay penalty charges or fees if you withdraw before the term is complete. Unfortunately, it appears that this may not have been made clear in some sales processes and people who always knew they’d need to be able to get at the money were either unable to do so or had to accept significant losses.
Were the risks explained fully?
Different bonds carry different levels of risk, and it’s up to the financial adviser to ask what you are happy with. They should record your decision and use it to recommend investments that suit your ‘risk profile’ as it is known. In addition, they should have fully explained any risks that are associated with the bonds they recommend, so that you can be fully aware of all the facts before making your decision.
What To do Next
If you have purchased a bond and feel that any of the statements above apply to your situation, then you may be eligible for bond compensation. This is intended to put you back in the position you would have been in had you been given the right advice, and while it may not be a life changing amount it may well make things a little bit easier for you.
About the Author: Biljana is writer and blogger, exploring finance and investment trends, currently interested in bond compensation and mis-sold investment bonds.
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