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Barclays fined £7.7 million for Aviva fund sales failings

by Matthew Goodburn on Jan 18, 2011 at 10:19

The Financial Services Authority (FSA) has fined Barclays £7.7 million for investment advice failings on the sale of two Aviva funds, the Global Balanced Income and Global Cautious Income funds.

The fine is the biggest ever handed down by the FSA to a company for retail failings, and follows a clampdown by the regulator on advisers' use of risk profiling and the tools relied on.

Today, the FSA said that between July 2006 and November 2008 Barclays sold the two funds to more than 12,000 people with investments totalling more than £692 million.

It ruled Barclays made the following failings;

  • Failing to ensure the funds were suitable for customers in view of their investment objectives, financial circumstances, investment knowledge and experience;
  • Failing to ensure that training given to sales staff adequately explained the risks associated with the funds;
  • Failing to ensure product brochures and other documents given to customers clearly explained the risks involved and could not mislead customers; and
  • Failing to have adequate procedures for monitoring sales processes and responding promptly when issues were identified.

The FSA added that Barclays had known about potential unsuitable sales as early as June 2008, but had not taken 'appropriate and timely action'.

Of the 12,331 investors affected, some 1,730 had complained about the advice they had received from the bank. In its own past business review, Barclays found that 3,099 or 51% of the sales of the cautious fund, and 3,378 or 74% of the balanced fund had required further consideration.

So far, Barclays has paid out some £17 million in compensation to investors, with the FSA estimating it may have to pay out a further £42 million for mis-selling the two funds.

Margaret Cole, the FSA’s managing director of enforcement and financial crime, said: 'The FSA requires firms to have robust procedures in place to ensure any advice given to customers is suitable. Therefore, when recommending investment products, firms should take account of a customer’s financial circumstances, their attitude to risk and what they hope to achieve by investing.

'On this occasion however, Barclays failed to do this and thousands of investors, many of whom were seeking to invest their retirement savings, have suffered. To compound matters, Barclays failed to take effective action when it detected the failings at an early stage.Because of this, and given Barclays’ position as one of the UK’s major retail banks, we view these breaches as particularly serious and fully deserving of what is a very substantial fine.'


Over the period examined by the FSA, performance of the two Aviva vehicles has been less than sparkling.  While the balanced sector fell 16.8%, the Aviva Global Balanced Income fund lost 31.8%.  The second vehicle, Aviva's Global Cautious Income fund, lost 19.2% between July 2006 and November 2008.  Over the same period the ABI cautious sector fell by a much lesser 15.8%.

6 comments so far. Why not have your say?

Greg Heath

Jan 18, 2011 at 10:58

Wonder when the FSA are going to actually realise that the way they regulate they only damaging the end user - the client with increased cost and less choice.

Surely this is more evidence that the banks are the least suitable source of quality financial advice.

Friends who work in the big 4 tell me that the training and pressure for targets has never been as bad. The failures of barclays can be applied to most banks and building societies from what I have seen and the messes I have cleaned up. This situation is not going to change in the near future but we all ultimately pay the price with this negative publicity.

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Ray Shepherd

Jan 18, 2011 at 10:59

What do the FSA do with the money?

and, I'll bet that Barclays cover the fine with increased charges somewhere down the line!

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Jan 18, 2011 at 11:54

We are not told

1) Were these sales to the 12,000 investors Face to Fact following a factfind and report prior to the sale.

2) we are not told what commssion uplift or other 'incentives' were paid by Aviva to Barclays

The public can never trust the banks again with finacial advice - we know this - problem is we are all tarred with the same brush

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Anonymous 1 needed this 'off the record'

Jan 18, 2011 at 12:04

My daughter works in the retail end of one of the Big 4. Primairly she is on the front line and has a very good sales record but she is absolutely at her wits end and on the point of leavng the sector as the more sales she achieves her targets just rise and rise and rise and rise and woebetide her if her success to date is not compounded accordingly.

What a way to treat staff members and the above is just the tip of her complaints.

Also no wonder that customers "Just Say No" when battered by tellers for investment advice. The sad thing is some say "yes" and get bad advice and perhaps as bad many say "no" when good advice is actually required.

Still as long I won't go there!

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Chris Lee

Jan 18, 2011 at 13:29

It would be interesting to know what financial incentives Aviva paid Barclays for selling its funds.

The same potential problem also exists in many 'fund of funds' and discretionary managed funds. How do we know if they are selecting funds on performance/asset allocation/risk basis or on the basis that some funds will pay higher fees than others?

Are the funds being recommended in the best interest of the customer or the retailer?

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Anonymous 2 needed this 'off the record'

Jan 18, 2011 at 20:00

Perhaps Barclays could ask Bob Diamond to pay back the £36,000,000 bonus he received in 2008. Might go some way to "balancing the books!"

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