The story of the plight of Mr and Mrs Green continues. This story is based
on true events and is narrated by the son of Mr and Mrs Green.
In Chapter 5, Readers will recall that my parents, Mr and Mrs Green, inherited £800,000 so they went down to their local Lloyds’s Branch to see their local friendly adviser. They had previously invested £30,000 with him.
I subsequently learnt that my parents decided to invest the £800,000 with the adviser.It appears he had advised the £800,000 be invested into one Investment Bond.
Being a curious chap I decided to double check on the advice my parents had received-as £800,000 is a lot of money; and my parents are of a generation who trust their bank,their lawyer,and doctor,without question.
My mother had told me that when she met her local adviser in the branch –there had been a lady from Lloyds Private Bank present; and the fact that there were two advisers-I was curious as to why this was.
In Chapter 7- the story continues. I rang the local office of Lloyds Private Bank and spoke to a certain Mr Jones. Mr Jones was an experienced Investment Adviser with Lloyds Private Bank.
I had started my conversation with Mr Jones explaining I was shopping around on behalf of my parents who had inherited £800,000.I explained that my parents were customers of the local adviser, who had an office in their local branch and they had previously invested £30,000 on his advice.
Mr Jones had helpfully explained that if his parents asked the local adviser for his advice then he should automatically refer them onto Lloyds Private Bank .The local adviser was only permitted to advise on capital amounts of up to £100,000.
When I explained that somehow my parents had been persuaded to invest the £800,000 with the local adviser and not invest through the Private Bank –Mr Jones expressed some shock.
Mr Jones was genuinely concerned for my parents; and he explained that as he was shortly to be leaving Lloyds Bank for another position-he was happy to meet over a pub lunch to explain what had he thought had happened to my parents as he had come across similar incidences before.
Mr Jones explained he was leaving Lloyds because he had become disillusioned by the way the Bank treated its customers.
So the next Saturday I met Mr Jones who began to explain why and how my parents had been so poorly treated.
“You have to remember that Lloyds TSB is a vast sales machine-like a mega-vacuuming operation; or another way to describe Lloyds TSB is as “a Vampire Squid”. My reference to a “Vampire Squid”, I have unashamedly taken from the famous reference made about Goldman Sachs,when the Rolling Stone Magazine journalist Matt Taibbi described the Wall Street Bank as a “Vampire Squid”.*
“The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”
Mr Jones continued;-
“In the same way LloydsTSB is everywhere in the UK “wrapped around every High Street”and “jamming its blood funnel into every Shopping Mall and Shopping Centre.Just like a Vampire Squid!”
“You also have to bear in mind that the senior leadership of these retail banks make millions of pounds per year in pay and bonuses. We know that the former Chief Executive of Lloyds Bank,Eric Daniels,received over £20 million-and he succeeded in bankrupting Lloyds Bank.
“We also know that the former Retail Director of Lloyds Bank Helen Weir banked over £10 million.She was responsible for all retail sales including the selling of the Payment Protection Insurance –which as we know was mis-sold to millions of customers.
“The new CEO Antonio Horta-Osorio was handed a reward package of up to £13.4m with a Golden Hello of £4.6m.His total rewards are dependent upon him reaching certain targets in sales growth and the price of the bank’s shares.”
“So the rewards on offer are substantial and this huge “Vampire Squid” sales machine is set up in such a way to incentivize the whole sales operation- starting from the CEO right down to the local sales consultant operating in your local branch.
“This sales machine –Lloyds TSB- is predatory.It doesn’t recognise values such as morals,ethics,fairness or transparency.Nor does it recognise customer service.The Banks’sales consultants are not rewarded for customer service.They are rewarded for achieving targets working on a relentless conveyor belt;selling selling selling and feeding the voracious appetite of the Britain’s vampire Squid.
Lloyds TSB customers are fodder or plankton ready to be sucked up.The plankton fodder is fed into the machine to help senior bankers get rich and they do get rich.
If the customers aren’t happy-so what? There are millions of more customers ready to be consumed -like plankton being sucked up by Britain’s Vampire Squid.-which is LloydsTSB.
Because there are millions of customers,the bank does not need to care about retaining their business because there are so many more new juicy bits of plankton like customers ready to be sucked up by the Vampire Squid.
“The senior leadership of Lloyds Bank and it’s retail operation -LloydsTSB are motivated by greed. In order to satisfy their greed and their desire to get rich-the Senior Directors have constructed a system whereby they manage the bank to maximise charges and costs to generate bumper profits irrespective of the quality of customer care.
In most other business sectors,the satisfaction of the customer is hugely important to the success of the business.In Britain-the Retail banks have been proven to consistently abuse the trust of their customers.
They simply do not care- because to properly care for their customers is expensive and reduces profits and reduced the self-enrichment possibilities.That is why the description of Lloyds Bank being Britain’s Vampire Squid is entirely appropriate.”
“Yes I think it is a good description”-I add.
“It gives me images of a huge ugly slimy beast consuming everything in it’s way -getting bigger and fatter- a greed machine”- I remarked.
“So yes-Lloyds Bank is a greed machine!Lloyds Bank is Britain’s Vampire Squid.The British people are rightly wary of the High Street Banks and they are fully aware that these bankers get very rich while they themselves,the customers,are paying extortionate charges and excessive commissions -and receiving poor advice. There have been a whole series of mis-selling scandals over the last 10 years.But the worst is the Payment Protection Insurance scam.**
“The way your parents have been abused is because of greed but also fear.It is a combination of the fear and greed factor.”
“The fear and greed factor?”-I ask.
“Yes,it’s the fear and greed factor.LloydsTSB is not managed by good leadership,or the leaders of the bank,the Senior Directors, would be role models to the workforce –it is quite the opposite.
“For example how can Senior Bankers such as Helen Weir, the former Retail Director and Eric Daniels, the former CEO be allowed to leave the bank with their fortunes intact- but the bank they have left- is flat on its back and effectively bankrupt? And the bank has received record numbers of complaints which indicates high levels of customer dissatisfaction.
“Some may say the Senior Directors of Lloyds Bank have looted their own customers and have got rich in the process.”
“Do these Senior Directors care? No! Why should they care? They have made their fortunes.Part of their wealth was derived from this massive PPI mis-selling!
“What sort of leadership is that?There is no example of good leadership within Lloyds Bank.Lloyds Bank is managed through fear and greed.
“The greed factor is applied by setting up a system whereby sales staff and their managers and directors get richer with bonuses if they’re able to reach their sales targets.But lurking behind the operation,always in the background and never far away- the management of the bank applies the element of fear.
“Wo betide! If you do not meet your targets you will be put on a “personal improvement plan”-which is one step away from being given a warning of being fired!
“What is particularly alarming about this fear system is that when LloydsTSB was busily selling the Payment Protection Insurance contract, which we know was a flawed contract -if you- as a sales consultant had objected in any way to the unfairness of this contract and you had raised your own concerns that you were mis-selling to your clients-then you could well find yourself put on a “personal improvement plan.”
“So staff knew they were mis-selling the PPI contract !They knew there were compelled to sell in a dishonest manner ;the staff knew they were abusing the trust of their customers!But they were too scared to confront the bank’s management.
“So this fear is being felt throughout the bank, and it is the fear and greed factors which has oiled this vast unscrupulous sales machine.There is not one iota of any leadership qualities in evidence in Britain’s biggest bank.Lloyds Bank is Britain’s Vampire Squid where fear and greed rule OK.
“So describing Lloyds Bank as a “Vampire Squid” is entirely suitable.
“But let’s go back to your own parents who overpaid £64,000 in tax and charges which were completely avoidable. You are of course wondering how on earth this can happen.After all Lloyds Bank is meant to be regulated by the Financial Services Authority.”
“Yes!How is it that this Bank which is meant to be regulated-can seemingly completely ignore such regulations? After all aren’t these regulations,written in law and is legislation? Isn’t this legislation- which has been passed by the Houses of Parliament?”
“Yes,of course.The Financial Services and Markets Act 2000 set up the regulator-the Financial Services Authority to precisely deal with abuses such as your parents have experienced.
“Well in theory anyway.But I’m afraid to say that British Retail banks have regularly flouted UK regulations and UK law anyway. Since the FSA was set up in 2000 there has been a series of mis-selling scandals and as we know the Payment Protection Insurance Scam was widespread and massive and went on for over 10 years.
“ Not only that,the regulator- the FSA,who started regulating these insurance contracts in 2005,took six years to act and finally stop the mis-selling.”
“Six years?”-I ask with disbelief.
“Yes,it was only in early 2011 that the FSA finally stopped this PPI mis-selling.
“Even the regulator’s Chairman- Lord Turner has admitted the FSA has consistently failed to prevent mis-selling and failed to prevent gross distortions.This is why the FSA is a discredited regulator and is considered ineffective;and this is why it is being wound up to be replaced by a new regulator the Financial Conduct Authority,which is due to begin operations in 2013.
“The FSA regulated the banks by what seems to be a “tick box exercise”.They do not seem to understand what goes on in the local branches.They receive regular reports from the banks and provided the boxes are ticked then they assume all is OK.
“It is only when the customers begin to complain in large numbers does the FSA start to act.So it is “reactive”-applying regulation after the event and only when there is a huge amount of public disquiet do they wake up and do their job.
“So the FSA does not work to prevent abuse-otherwise these mis-selling scandals would never have happened.
“Surely UK law lays down certain guidelines or principles by which the banks are meant to comply with?”- I ask.
“Yes in theory you are right- the FSA lays down guidelines known as “The Principles” which are embedded in UK law- and the banks are legally obliged to treat their customers with honesty,fairness,integrity and transparency.It’s the law.***
“So returning to your parents,if they had been properly briefed and advised then they should have invested their inheritance of £800,000 with the lady from Lloyds Private Bank and then the Bank could have demonstrated that they were applying these FSA principles of fairness,honesty,integrity and transparency.”
“But they won’t advised to do so!”I exclaimed.
“Exactly!The Lloyds Bank management allowed your parents to be manipulated and persuaded to invest the £800,000 with the local adviser and not with Lloyds Private Bank.”
“This is just unbelievable!How can this happen?”I tell myself to calm down.
“Well,it’s back to the fear and greed factor.Just try to remember that LloydsTSB is a vast sales machine –“Britain’s Vampire Squid.”
“Britain’s Vampire Squid doesn’t recognise the intrinsic human values of fairness, honesty, integrity and transparency when it is programmed to act to hit targets which trigger bonuses and self-enrichment.
“The Vampire Squid is not thinking of your parents as citizens or humans; the Vampire Squid is only thinking of the riches,the bonuses and targets.Your parents are the plankton fodder.
“The bank is a highly programmed sales machine,and the Vampire Squid does not think of your parents as people ;they are merely plankton fodder- a bank account number ready to be sucked up to reach targets and produce nice juicy bonuses.
“You also have to remember this.The local adviser,you will remember,first advised your parents when they invested their £30,000 with him. To his credit he worked hard to keep in touch with them and made the effort to chat with them,every time they visited the branch doing their normal banking business.In many ways he is a professional salesman and your parents, being decent folk, appreciated his interest and efforts.
“But then one day your parents knock on his office door and announce that they want his advice on £800,000.Normally the local adviser would advise on much smaller amounts of £10,000 -£15,000- up to his maximum limit of £100,000.So he makes his targets by volumes of smaller sales transactions.He sees over 25 clients a week and he works hard.
” But suddenly he is confronted with a huge tempting prize.It’s very tempting for a sales person to go after the big mega sale-but because of the way the bank operates he is only allowed to advise on amounts up to £100,000-which of course he finds very frustrating.He should automatically be referring your parents to the Private Banking office.
“But then he thinks;-
“’These are my clients!I won their trust and invested the £30,000 .I work hard to keep in touch with them over the years.Why should I not benefit too?The bonuses could be huge!This could be a big opportunity to reach my yearly targets in one fell swoop!”
“So you have to get into the adviser’s mind-set- that even though he is fond of your parents in his own “sales man like way” he is not thinking of them as he should do -which is to give them best possible advice.
“He is thinking of riches; he is thinking of the accolades of being a top performer within the bank and he is thinking of reaching targets.Greed takes over.He could well qualify for a free overseas trip;as a reward for being a top adviser and he can take his wife along too!
“The last thing on his mind are the FSA principles of honesty,fairness,and transparency and integrity.
“So he approaches his own manager and asks,if there is any way that Mr and Mrs Green can be persuaded to stick with him rather than lose the business to the Private Bank. After all-his own manger would also benefit from such a big sale.
“At this stage I should pause. Because I should stress that there is no way that your parents’ investment of £800,000 could have been approved without several managers knowing about it and also the Compliance team would have been aware of the transaction.It is the Compliance team that should check all sales transactions for their suitability.”
I interrupt Mr Jones.
“So Mr Jones, what you are saying is that it was the Management and the Compliance team who are guilty of breaking UK law?”
“Spot on! You’re absolutely correct! The local adviser has gained his manager’ permission to persuade the clients to invest with him.
“So the adviser does not think he has done anything wrong because the sale was approved by his manager and waived through by the Compliance team.
“He felt he was doing his duty and doing it well- by being able to hit those targets and gain substantial bonuses not only for himself but for his own manager -and indeed the Lloyds TSB branch manager too.
“As the compliance team allowed the sale to go through the local adviser thought his advice must have been sound. And you have to remember that local advisers have only limited training and limited qualifications so he might not have been aware that his advice was wholly inappropriate. Because he does not have the training in taxation planning and he does not have the training in other issues such as trusts,long-term-care and wealth preservation (inheritance tax planning).
“He is just selling the clients the same product as he sells to all his other clients -as he has been trained to do.But in this situation,rather than being £15,000,which is his normal level of business-it is £800,000.”
“OK, I think I understand”- I interrupt-“But what about the lady from the local Private Banking Office?
“Why on earth did she not insist that it was much more appropriate for my parents to invest with the Private Bank because the advice was far more suitable and comprehensive and so much more cost effective?
“Her advice would have saved them at least £64,000 in charges and tax?I do not understand why this is allowed to happen!”
“Yes,I know- it does sound extraordinary.The lady from the Private Banking Office would have complained to her own manager. She would be most upset and not only has she been deprived of her rightful businesses-she would have been concerned that the clients would have received vastly inferior advice and at a much greater expense.”
“So why does her own Manager fail to act to prevent this mis-selling going ahead?”-I ask.
“Surely it was to his benefit to make sure that his own consultant was able to invest the £800,000 with the local Private Bank Office.Why on earth didn’t he stop this corruption? Because the more I learn about this,-the more I think this is a clear case of corruption .I would also venture to say it was fraud.”
“Yes I agree with you-it is an example of fraud.” Mr Jones replied.
“Why did the Private Banking Manager allow this to happen when clearly it was against his interests? He was after all losing a large sale of £800,000 to another sales operation-within LloydsTSB.”
“Fear!Pure fear!The local adviser and his management were motivated by greed.But the Private Banking Manager was motivated by fear.”
“Fear? But what was he afraid of?”I asked.
“You have to remember that LloydsTSB-is Britain’s Vampire Squid, which is motivated by greed and fear.So what appears to have happened in this situation is that the Private Banking Manager was afraid.He was afraid that if he supported his own consultant then this would not be to his overall advantage
.He must have been told that if he objected to the sale going through it would cause problems;and such problems may be mentioned in his next annual review.
“And he would have told his own consultant-the lady from his own team of Private Bank Consultants – that it was not in her interest to kick up a fuss.So she was told not to protest.
“To me,having worked in Lloyds for seven years now -it does in fact make absolute sense-but I should put it in context. Remember the Private Banking operation is a tiny part of this huge network which is the LloydsTSB retail bank.
“You also have to remember that the local adviser is embedded and is resident in the local LloydsTSB branch where your parents bank.His targets are dependent upon working hand-in-hand with the local branch.So his work is an important sales element within the local branch and his success makes a major contribution to the local branch reaching it’s own targets.
So the fact that the local adviser was allowed to persuade your parents ,against all “the so called rules”-is evidence that the Lloyds TSB’s Retail management staff were also involved in allowing this mis-selling to go ahead.
“How do you mean?”-I ask.
“If your parents could be persuaded somehow to invest the £800,000 with the local adviser through the local branch then this success would feed through to the Local Director and his own targets and bonuses as well.
“Local Director?I’m sorry,can you remind me who or what is a Local Director?”-I ask.
“The Local Director is probably the most important mid-level Sales Director in the LloydsTSB operation.He is responsible for a group of branches- so for example he could be in charge of 10 branches in the Reading and Thames Valley area -which might include the two large branches in Reading town centre, and branches in the suburbs of Winnersh and Tileshurst; and the outlying towns such as Goring,Henley,Marlow,Maidenhead,Bourne End and Wokingham.
“So the Local Director has a business-to run within the business and remember that Lloyds Bank is primarily a retail operation.The vast majority of it’s activities and profits derive from the branch network of LloydsTSB.
“So in comparison-Lloyds Private Bank is a tiny operation when compared to the branch network of LloydsTSB.The actual profits the Private Bank make within LloydsTSB-are small in comparison.
“So I believe the reason why your parents were treated so badly is that the Local Director must have put pressure on the local Private Banking Manager to allow the sale to go through.”
“But this is ridiculous!”I exclaim in consternation.
“It is ridiculous,but there is no other explanation. When you think about the actual commissions, which are derived from the £800,000-you have to understand that these commissions are the lifeblood of the bank-in the same way the charges they apply to your bank account are the life blood of the bank.
“So we know that your parents paid 3% setup costs on the £800,000, which is £24,000. But the lady from the Private Bank could well have offered an investment portfolio at nil set up costs or 1% charge of £8000. Quite often when large amounts of money are involved the Private Bank would waive the set up costs.
So we have a situation whereby the bank would lose £24,000 of revenue-if your parents did not invest with the local adviser.”
“So what you’re saying, Mr Jones is that Lloyds Bank considered the commercial considerations more important than the regulations which are UK law? And such laws are in place to precisely prevent this happening to my parents?”
“Yes.What is more revealing is that there must have been agreement between a number of managers to allow this investment to go through.”
“A number of managers? How many?”I ask in disbelief
“Because of the hierarchical nature of the bank-I suggest that would have been approval by at least seven managers.”
“Seven!Seven managers know about this mis-selling and did nothing to stop it?”
“Yes-at least seven managers; possibly more.”
“First the local adviser would have had his own manager’s permission to transact the sale. In addition,the local branch manager would have known as well as the Local Director.
“Then the Compliance manager and his or her manager would have known about the sale,as well as the Private Banking manager.So there are at least seven managers and maybe several more.”
“So let me get this straight, Mr Jones,-you are suggesting that seven managers ,junior ,mid-level to senior managers knew that my parents were being mistreated and allowed such mistreatment to go unchallenged; and these managers also knew the regulations and the law were being ignored?”
“Yes and as I explained-it is fear and greed.The greed of bonuses being triggered by targets being reached to enrich yourself.
“But there is the fear of not reaching your targets or the fear of the consequences of stepping out of line in challenging more powerful managers within the bank-such as the Local Director.
“As I have explained the Private Bank Manager would not challenge the Local Director even though he knew your parents were being mis-sold. So I’m afraid to say your parents are victims of Britain’s Vampire Squid –Lloyds Bank ,where fear and greed rule OK.”
I was most grateful to Mr Jones for his insights I wished him the best of luck in his new job.It was quite clear to me that he was relieved to have left Lloyds Bank and he was looking forward to be in a position to provide good advice in a transparent and honest manner to his clients.It was apparent to me that he was a professional and he was disgusted at the way Lloyds Bank treated their clients.
So what happened next? I went to see my parents the very next day and I explained to them what Mr Jones told me and I suggested to them that they make a Formal Complaint.
They also closed down all their accounts with Lloyds Bank.They submitted a formal Complaint to Lloyds Bank who in their response refused to acknowledge that the advice was in any way unsuitable or inappropriate.My parents then escalated their complaint to the Financial Ombudsman Service who is still investigating.
They are dealing with an Independent Financial Adviser.
I should add that the Financial Ombudsman Service has received 37,000 complaints concerning Lloyds Bank -January to June 2011- up from 22,000 in the previous 6 months.
I should also add that Which the Consumers Organisation recently published the results of a Mystery Shopper survey*** which provides further evidence that Lloyds Bank and the other High Street Banks are not fulfilling their legal obligations under UK law.
LloydsTSB continues to ignore UK law.
Please read below for a precis of the Which Survey.
November 17th 2011.
This story is based on actual true events.I submitted a Formal Complaint about an similar incident in April 2010.Lloyds Bank have refused to properly investigate this complaint .
1.* Matt Taibbi writing for the Rolling Stone Magazine April 5th 2010 described Goldman Sachs as a Vampire Squid;-
“The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”
2.**The Lloyds Banking Group has had to set aside up to £4bn to cover the costs of the PPI mis-selling scam.
3.***The FSA Principles are statutory obligations.
I submitted a Formal complaint to the FSA in May 2011-whose investigations are ongoing.I am in correspondence with the FSA concerning new Formal complaints which will be submitted to the Regulator.
These Formal Complaints will be duly posted, in edited form, on this site.
**** THE WHICH SURVEY;
The majority of advisers in high street banks and building societies are misleading customers with poor advice about investment products, an undercover investigation by Which? has revealed.
Just five out of 37 advisers approached by mysteryshoppers gave good advice about investments, according to the consumer group.The majority did not appear to properly understand the risks associated with investing, and made misleading statements about the features and costs of products.
Which? also found that many advisers recommended investment products that were completely inappropriate for its mystery shoppers, who were all inexperienced investors aged over 60. Out of 37 advisers,17 advisers recommended complicated and high-charging bonds, while four failed to mention the hefty charges investors faced if they withdrew money in the first five years.
Even more worryingly, 18 of the advisers also claimed they did not charge for the advice when they in fact earned commission if a product was taken out. Lloyds Banking Group emerged as the worst offender for not explaining that ‘free’ advice is paid for through commission, while one adviser at Yorkshire Bank told a researcher to invest £50,000 in a bond without disclosing that it was worth £4,400 in commission to the bank.
Which? has warned the banks that it is reporting its findings to the Financial Services Authority (FSA) for investigation. It urges the regulator to punish the worst offenders.
Richard Lloyd, executive director of Which?, said: ‘Now, more than ever, consumers need advice they can trust on what to do with their money. It’s shocking to see such low standards.
Earlier this year Barclays was fined £7.7m for mis-selling unsuitable investments to customers, while Bank of Scotland was fined £3.5 million for mis-handling complaints about its advice service. In both cases the majority of complaints came from vulnerable
customers such as inexperienced investors or customers over 60 years old.