Bank admits ‘guarantee’ is not guaranteed

According to a recent press article*, Santander has written to some of its customers to admit that it cannot actually guarantee one of its ‘guarantees’, and that these investors may not be covered by the Financial Services Compensation Scheme.

The bank has run into trouble over two specific ‘structured products’ marketed between 2008 and 2010. (And if you’re wondering what on earth a ‘structured product’ might be, I’m right with you in having little truck with such gobbledygook.)

Santander has now explained that its marketing of these products as guaranteed had been misleading and has removed the word ‘guarantee’ from its literature. The problem arose because savers would not have been covered by the FSCS if Santander went bust – but the marketing material hadn’t made this clear.

Quite frankly, I have never been completely comfortable with the makeup of ‘structured products’ and have never recommended them. They are definitely, in my opinion, NOT for the risk-averse investor and the word ‘guaranteed’ should be taken with a pinch of salt.

Anything marketed as ‘guaranteed’ should be thoroughly investigated before you buy. For example, who is underwriting that guarantee, and what are the terms under which it would be triggered?

To ensure your investments are protected and to reduce the chances of your money being lost, we urge potential investors to seek expert advice before they commit to investments of this nature.

Equitable Life, Keydata, the High Street banks … the list of debacles goes on!

*The Daily Telegraph (13/3/11)