Two Faces of the Man from the Pru; One Man - Represented on the Right in a Typical Prudential Advertisement - Could Be Trusted to Give Families Friendly advice.The Other, Pictured Left, Pushed Salesmen with Promises of Cars and Caribbean Holidays at the Height of a Mis-Selling Scandal. So Why Is It That the Man on the LEFT Still Draws a Six-Figure Income, Runs a Building Society and Heads the Student Loans Company?

Article excerpt


Look up Keith Bedell-Pearce in Who's Who and you will read that he is a distinguished solicitor with an impressive record in the boardrooms of some of Britain's top firms. His rewards from these years of service include a [pounds sterling]3 million mansion.

But you will not read that he presided over the worst of the pensions and endowment misselling that has blighted the finance industry for the past two decades.

Hidden in the list of his corporate achievements is the fact - and one he is increasingly anxious to play down - that he was also the man in charge of Prudential's salesforce just when mis-selling of pensions and mortgage endowments reached its shameful peak in the late Eighties.

And new evidence obtained by Financial Mail relating to the period when Bedell-Pearce was running the Prudential's 12,000 salesmen proves the shocking extent of that mis-selling.

Bedell-Pearce, 58, joined Prudential in 1972. Promoted rapidly, by the mid-Eighties he was playing a key role in shaping the 'new Pru' by turning salesmen away from door-to-door collectors of small premiums, instead driving them to sell expensive endowments and pensions.

He became boss of the salesforce in 1986, the year in which more endowment policies were sold by all companies nationwide than any other year. The stock market was roaring and interest rates were high.

Few people imagined that using an endowment to pay off a mortgage was fraught with risk. And judging by the patter adopted by salesmen working for Bedell-Pearce, the Pru's customers were not warned of any risk at all.

Financial Mail has seen an endowment sales aid used by Pru salesmen, dated August 1988, consisting of a series of questions for potential customers.

The aim seems to be to corner customers into buying an endowment. There were 13 questions and potential outcomes - all of which 'arrived' at a sale.

Nowhere in this document is there any question about customers' attitude to risk. Nor is there any mention of the fact that endowments are stock market investments, vulnerable to the ups and downs of share prices.

The only question that touches on the way an endowment mortgage is supposed to work is one which says: 'Do you want to include an element of savings in your mortgage?' It is unclear how long this sales aid remained in use. But it is probable that tens of thousands of the Pru's 260,000 endowment mortgage policyholders signed up after being persuaded by sales

parroting this routine. At the same time, Bedell-Pearce, feared by staff and known as 'the man with the pink tie', slashed salesmen's basic salaries and forced them to become more reliant on commission.

Lavish reward schemes were launched, promising Caribbean holidays, cars and whopping bonuses to the best salesmen.

Hundreds of salesmen departed in protest and the Pru suffered the first of the negative publicity that has plagued it ever since. But mis-

selling of endowments was not the only problem.

By 1990, when Bedell-Pearce was four years into his job, the Pru was attracting serious criticism for misselling pensions, too. But Bedell-Pearce, at that point the company's most-quoted senior executive, insisted all was well.

As late as December 1993 he went on the record saying: 'There's no reason to think we have a particular problem.' The reality was somewhat different.

Internal investigations undertaken by the company six months earlier had found 'evidence of widespread activity intended to deceive customers'.

Ashocking document, dated July 30 1993, circulated to branch managers and seen by Financial Mail, made clear that some Prudential reps were routinely deceiving and defrauding savers.

The secret report stated that some salesmen were falsifying customer questionnaires, forging their signatures and 'churning' policies - reselling unnecessarily to pocket sales commission - of the poorest savers. …