Half of bank clients have no knowledge of charge levels
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A damning new study reveals half of customers advised by banks and building societies on financial products have no idea what charges they are paying.
The extensive research of over 16,000 people, carried out by the British Population Survey on behalf of Alan Steel Asset Management, shows 50 per cent of customers who bought products from banks and building societies either did not know what the charges were or thought there were no charges.
The figure for people advised by a company agent was 42 per cent and 28 per cent advised by an IFA did not know the charges.
Twenty-two per cent of bank and building society customers thought the products they had bought had no charges compared with 13 per cent who dealt with an IFA or a company agent.
The results are based on a representative survey of 16,000 people between April 2010 and July 2011, with 1,000 people surveyed each month. Over 2,000 had transacted a regulated financial product within the previous six months.
Alan Steel Asset Management chairman Alan Steel says: “This research proves the biggest risk of consumer detriment lies with the banks. The FSA needs to be tougher on the banks on the disclosure of charges, I think that is obvious. A huge number of customers simply do not understand what they are buying or how much it is going to cost them.”
Hargreaves Lansdown head of advice Danny Cox says: “In terms of disclosure, I do not doubt that banks meet their obligations but the best and most readable financial planning reports are always produced by IFAs and financial planners.”
A Consumer Focus report in July criticised IFAs putting clients into high-charging funds by churning pension business but made no mention of concerns over tied advisers. The report based some of its conclusions on just 31 cases and was heavily criticised by the IFA sector and Aifa.
British Population Survey research director Mike Hare says: “Our survey shows the biggest risk to consumer detriment by far is coming from products sold by banks and building societies, not IFAs. You have to ask why Consumer Focus chose to focus its attention on IFAs rather than banks.”
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Readers' comments (12)
Anonymous | 18 Aug 2011 1:04 pm
No surprises there !
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Anonymous | 18 Aug 2011 2:02 pm
Locally here they do inform as to their tied status either pretending to be Whole of Market be interesting to this survey undertaken and with SJP another firm that indicates its status incorrectly
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Richard Ross | 18 Aug 2011 3:00 pm
I have to disagree Anonymous1 - I think it's a great surprise that it appears 50% do know the charges!
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Anonymous | 18 Aug 2011 3:08 pm
Ok... so how many client(s) actually know in £'....s what the charge is???
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Andy | 18 Aug 2011 5:39 pm
A big fat number that is ommitted is the "cost of regulation" charge!
If it was diclosed on all illustrations it would be remembered by the vast majority of consumers because they would be shocked at the cost and ask why it is so high.
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Keith Jayne | 19 Aug 2011 8:46 am
This is not news.
Every IFA knows this.
The FSA also know this, but refuse - for some inexplicable reason - to do anything about it.
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Chris F | 19 Aug 2011 10:15 am
to: Keith Jayne.
It's hardly inexplicable. The factors are, in this order:
1) The banks can afford a lot more highly paid lawyers than a typical IFA or, for that matter, the FSA.
2) The senior staff at the FSA are from a banking background and hence accept the culture that proliferates in banks. It is seen as the norm to rip customers off for the sake of profit. (Look at the PPI mis selling - no one senior lost their job as a result)
3) The FSA staff are most likely to continue their career in a bank after leaving. After all, they would want to continue their track record of incompetence and failure at the expense of the consumer.
4) Small minds like small things. Banks are too big of a problem for the jobsworths in the FSA to conceive. Banks are seen as the system, the solution, rather than the corrupt heart of the problem.
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Hmm | 19 Aug 2011 11:39 am
Hardly great figures for the perfect IFA population either!
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Chris F | 19 Aug 2011 12:48 pm
The IFA figures are worrying; in terms of risk to consumers, however, the banks sold 50% of the products against IFAs, 19%.
In the consumer population, then, banks are responsible for 25% being badly mis informed and IFAs, 5%.
Banks are therefore producing 5x the problem that IFAs are.
Where, however, is the regulatory spotlight constantly focused?
I refer to my post above for the explanation of the FSA's actions being in contrary to the facts at hand.
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Hmm | 19 Aug 2011 1:49 pm
There's always the chance that the clients were correct in saying there were no charges of course. This is often the case with structured products where the same product / return is offered whether advice is received or not.
Maybe this research is flawed too?
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