Top building societies told to pay up over Philips trusts

A number of leading mortgage banks are being urged to compensate customers who lost money due to being forced into unsuitable third-party financial products – Philips Trust Corporation – that failed last year.

The Mail on Sunday understands that the All-Party Parliamentary Group on Personal Banking and Fairer Financial Services is urging the city regulator to pressure mortgage banks embroiled in the debacle to pay. They include Leeds, Newcastle and Nottingham, as well as smaller players such as Cambridge and Saffron.

The parliamentary party received evidence from clients in the construction sector who have lost money as a result of Philips’ plunge into administration. According to those in attendance, the evidence was ‘scathing’ with customers – almost all elderly – pushing inappropriate products.

In the late 2010s, building fund clients were drawn to Philips’ grid when affiliates encouraged them to create wills — and trusts that would protect their assets (their home and investments) against future healthcare costs and estate taxes.

Originally these were provided by sister companies The Will Writing Company (TWWC) and Family Trust Corporation (FTC), with the building societies receiving a commission for every sale they made.

But when TWWC went bankrupt in 2018, Philips took over and major problems arose. It started charging extra while customer calls went unanswered. Philips plunged into administration just under a year ago – weeks after the MoS raised concerns about his health.

Since last May, Kroll Advisory managers have been sifting through Philips’ financial innards, trying to unravel customer assets from the mess.

It’s a process that’s proving costly, as clients have to pay four-figure contributions to have their homes removed from trusts set up by Philips. Those who have investments in the trusts have been warned that they are unlikely to get back the amounts they put into them due to the poor quality of the holdings. It may take until 2026 for any customer refunds to be completed.

Andrea Hindley, from Devon, has been involved – along with her three sisters – in revoking the trust that Philips had set up for her mother and father, consisting of their home in Lincolnshire and a number of investments. “They took over the fund in 2015 after it was recommended by their local building society, the Nottingham,” she told The Mail on Sunday on Friday. They were both in their eighties at the time. Unfortunately, my mother passed away unexpectedly last April and my father is in poor health.’

Andrea says the cost of putting her father’s house into a new trust overseen by herself and one of her sisters will be in the order of £6,000. She also believes that the investments – bonds – will be a fraction of their original value when they eventually mature.

‘Building associations claim that they have never had anything to do with Philips,’ she adds. “That’s right, but they were encouraging clients like my mom and dad to put into a trust in the first place that I didn’t think was right for them. They’re not rich, they’re just well off.’

Mark Bishop, head of campaign strategy at the financial services pressure group, the Transparency Task Force, serves on the Secretariat of the All-Party Parliamentary Group. He believes that building funds should be obliged to pay compensation.

He argues that any fee should cover the costs associated with setting up the original trusts, any subsequent costs (charged by Philips) and the investment losses suffered by customers.

In recent weeks, Nottingham has been reaching out to customers. Speaking to the MoS on Friday, “We are assessing the impact of the ongoing Philips administration on customers and how we may be able to provide support. Unfortunately it’s not easy, because we didn’t have a direct relationship with Philips.’

The Building Societies Association, the industry’s trade association, said: ‘We are aware of – and sympathize with – the difficult situation some people find themselves in. But to be clear: no mortgage bank has introduced customers to Philips, the company where the problems occurred.’

Newcastle acknowledged that the Philips debacle had been a ‘source of dissatisfaction’ for a number of customers. It said it has set up a dedicated customer support team.

The parliamentary group of all parties has written to the Financial Conduct Authority urging it to investigate construction associations involved in the Philips debacle. On Friday, the FCA said it had asked a number of mortgage banks for more information about customer referrals to trust service providers.