Banks need to start putting customers before bottom line profits, says Colin Lawson

After everything that has happened during the last few years in terms of the credit crunch, it still amazes me how many intelligent, and often wealthy individuals, still trust banks to provide them with investment and financial advice.

Coutts is still one of the most respected names in private banking despite it being owned by RBS. RBS, of course, is propped up with our tax money.

I won’t go into former RBS CEO ‘Fred the Shred’ and the loss of his knighthood (originally given for services to banking, but which was recently ‘cancelled and annulled’) or the political storm over current RBS CEO Stephen Hesters’ bonus. However, what I would like to focus on is the £2.2m fine that the Financial Services Authority (FSA) has imposed on RBS subsidiaries Churchill Insurance and Direct Line.

Bottom line

Without going into the details of the case, it appears the FSA requested details of 50 closed complaint files from these two companies. Seemingly, before submitting them to the regulator, 27 files had been altered including seven signatures being forged.

Perhaps this wouldn’t be so bad if it were an isolated incident, but this is the second major fine in a year as RBS and Natwest (another RBS subsidiary) were fined £2.8m for poor complaint handling in January 2010.

Coutts was the subject of numerous complaints over the alleged mis-selling of the AIG enhanced variable rate fund which was an investment they described as low-risk and promoted as being as safe as cash – a nice sale at an average individual investment amount of over £3m! The fund was subsequently suspended and investors were told that a significant proportion would be inaccessible for several years.

Following the suspension, investors were allowed to withdraw 50 per cent of the full value of their investment. They were subsequently allowed to withdraw the remainder but at a 13.5 per cent loss. Alternatively, clients were given the option to keep the money tied up and get their full 50 per cent back in July 2012 – the majority chose this route to avoid the hefty loss, but it does mean that they’ve been unable to access half of their investment for more than three years.

Fact sheet

The largest complaint I am aware of is from Sir Keith Mills, the founder of the Air Miles and Nectar Cards loyalty schemes, who is suing Coutts for £8m after investing a total of £73m in the funds.

It was clear at the outset that the product had been mis-sold and I am of the opinion that Coutts should have come clean and compensated their clients immediately.

The FSA fined Coutts £6.3m over the AIG debacle in November last year.

So let’s sum this up - that is a total of £11.3m in fines across five different RBS brands and people still ‘trust’ them with their life savings!

I know it’s not that simple but I can’t help feeling that as the taxpayer owns 84 per cent of RBS, we are being hit with 84 per cent of these fines.

Instead, perhaps every customer buying a product or service from RBS (or one of their subsidiaries) should be given a fact sheet written by the FSA highlighting the poor practices they have discovered. Maybe then, that particular banking group might actually decide to put its customers before its bottom line profits.

Colin Lawson is founder and managing partner of Equilibrium Asset Management www.eqasset.co.uk