Bad Advice and Good Alternatives

By on February 7th, 2017 in Editorial

Between 2002 and 2007, two HBOS employees were bribed in return for falsely classifying a number of small businesses as ‘high risk’. The head of HBOS’ Impaired Assets Division (Lynden Scourfield; since jailed) would then insist on the SMEs using his favoured ‘turnaround consultant’ in return for the bank’s continued support.

What the small business owners didn’t know was that Scourfield and his preferred consultants were in cahoots, orchestrating trumped-up requests for additional finance that enabled the consultants to bleed SMEs with inflated invoices – sometimes to the point of running them into the ground.

(More detail on the mundanely complex mechanics of the fraud – and the depressingly tawdry nature of the bribes – can be found here.)

“Misconduct can go unnoticed in large, under-regulated organisations”

Obviously this is an extreme and highly uncommon pre-financial-crisis example of bank employees misleading their customers. But not only does it illuminate how vulnerable SMEs are to being misled and exploited; it demonstrates how easily profound misconduct can go unnoticed in large, under-regulated organisations.

Schemes like this thrive on gaps in the customer’s knowledge of complex financial processes and fees, and in a recent blog post we looked at the way in which some FX providers exploit this lack of transparency by giving bad advice (albeit on a much smaller scale) in order to steer clients towards detrimental decisions that will benefit the provider.

The problem is that customers often lack the information and confidence to question established and supposedly reputable financial service providers – and those looking to exploit the system count on this.

One easy way of avoiding misleading information – particularly when it comes to FX services – is by rejecting any prescriptive guidance about which way markets will move. Any apparent ability to predict the unpredictable is a red flag that you are being manipulated.

Meanwhile, SMEs told that they were ‘high risk’ in the course of HBOS fraud simply accepted the often unlikely diagnosis (some of the victims had never missed a single repayment) – quite understandably choosing to believe that they were in the safe hands of a trustworthy company.

“With new technology, power is shifting back to consumers”

The moral of this story should be empowering, however. Technology has enabled the rise of a vast array of financial service alternatives, many of whom – like us – offer simpler, fairer and more transparent alternatives to the norm than ever before.

Power is shifting back to the consumer as the marketplace grows, and SMEs are waking up to the fact banks may not always have had their customers’ best interests at heart; a recent study by Amicus Commercial Finance found that 47% of SME owners have received bank advice that actively harmed their business, while 52% have ignored advice from their bank in the preceding year.

This is a sign of confidence among SME owners. There is a healthy willingness to question the status quo that implies a growing self-belief among business owners; a self-belief that – if nurtured and utilised – has the potential to unseat those factions of the financial industry that seek to exploit the vulnerable.


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James is freemarket’s Chief Commercial Officer. He has a history of finding new ways to solve age-old financial challenges and was responsible for launching some of the first online money transfer and prepaid card initiatives in Europe.


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