FOS sounds alarm over bank advice
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The FSA will not commit to a specific review of banks' investment advice despite the FOS expressing fears about a rise in complaints regarding investment advice given by bank staff.
An FOS spokeswoman says: "Many of these consumers had only gone into the bank branch to make a withdrawal from a savings or deposit account but ended up being advised to take out an investment. It is particularly concerning that even when a consumer had explicitly referred to the fact that their main priority was to protect their capital rather than generate a return, they were still advised to invest in funds that put their capital at risk."
The FOS received 1,809 investment complaints from people aged 65 or older between April and July this year. This represents 22 per cent of overall investment complaints and compares with 4,163 complaints for the whole of 2008/09. The FOS attributes this rise to bank advisers.
Asked if it will look to review specifically the advice being given by banks, an FSA spokesman said: "We speak to the FOS on a regular basis and where we come across complaints that warrant further investigation, we will factor that into our supervision of firms."
But Association of Independent Financial Advisers director general Chris Cummings says: "It is no longer sufficient to say it will look at this under the normal supervisory process. It is little wonder that the FSA's future is at risk when it fails to take action when presented with clear evidence of wrongdoing."
In April, Money Marketing revealed adviser concerns about advice given by Barclays' advisers to elderly investors to invest large sums in Aviva's global balanced income fund.
In March, Money Marketing revealed concerns from Alan Steel Asset Management that bank advisers were selling corporate bond funds to savers hit by interest rates cuts without properly explaining the risks.
British Bankers' Association executive director Eric Leenders says that 1,809 complaints is "a relatively low number compared with the millions of bank customers of this age group who save".
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Readers' comments (15)
Anonymous | 20 Aug 2009 10:41 am
Concern over additional bolt-on misselling
In addition to worrying statistics over misseliing investment products to the elderly, there has to be further investigation into other areas of banking including mortgages and in particular insurance add-ons.
Bank staff are actively encouraged to push buildings or contents, life insurance even if this is not suitable or sufficient cover already in place. Ethics and good advice certainly seem to have been replaced by profit hunting and sales volume. How long can this go untested?
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John Davies | 20 Aug 2009 10:43 am
FOS sounds alarm over bank advice
Does this not once again send a message that that the British Bankers' Association, the Banks and the regulator do not treat the Financial Services Sector on a level playing field. If measured in percentage terms Eric Leenders is right in saying that 1,809 complaints is "a relatively low number compared with the millions of bank customers of this age group who save". But how many sales have they made that should be investigated before the FSA knock on the door of their biggest paymaster? The quality of advice via the Banks has been a concern for many, many years. If 1,800 complaints were lodged against IFA's the FSA would be pressing for a review now.
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Chris Pinkney | 20 Aug 2009 10:44 am
Banking on Bad Advice
Tip of the iceberg, how many IFA's have completed fact finds and when they have explained to the client what the Bank sold product is they are horrified as they understood they were just opening some other sort of account? They do not get told clearly enough they are not getting advice, they are mailed to come in for a review to ensure they have the best accounts for their needs and then are sold innapropriate investments. It is rife, but fi we think the FSA, FOS or anyone else will do anything about it, apart from expensive reviews and reports, then we're dreaming.
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Neil F Liversidge | 20 Aug 2009 10:59 am
Bad Bank Advice - So What's New?
This sounds like an excellent case for one of the FSA's famous thematic reviews. Except that it won't hapen because the FSA's bigwigs probably all hope to rotate to a well paid non-executive directorship with a bank in due course, just like many of their predecessors. They wouldn't risk upsetting their likely future employers, would they?
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Ken Bannister (Active Weallth Ltd) | 20 Aug 2009 11:16 am
Bank Advice
This is of course indicative of "close the stable door after the horse has bolted". It is well know and documented that less than 3% of complaints come from the IFA community. The banks however, have over 50% of the complaints. I have experience of banking practice relating to financial advice and I can categorically confirm that the "sale" is most important as this generates points and as we know "points make prizes". When will the FSA understand that in most cases bank advisers have a captive audience and it is therfore therir aim to sell to that audience without further thoughts of whether or not it is their best interests. If the advisers each carried their own PI cover and had to indvidually report to the FSA this type of miselling would plummet!
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Anonymous | 20 Aug 2009 11:29 am
Banks
oh well, roll on 2012 - 'normal' clients will not wish to pay, or be unable to afford, fees for independent financial advice so the FOS/FSA can all look forward to much much more of this as the public is herded toward the Banks in even greater volumes. God bless the FSA, long live RDR!!!
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stanley holmes | 20 Aug 2009 11:45 am
FOS Alarm on Bank Advice
At last there would appear to be a more positive approach to this sector which I believe would if investigated indicate the largest mis selling ( you cannot call it advice) that has ever taken place in the UK's financial markets to the consumer.
I am surprised that the Consumer's Association have not investigated this matter before now.
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Evan Owen | 20 Aug 2009 12:42 pm
"a relatively low number"??
The FOS doesn't need so see these complaints in the first place, in any event they are probably the tip of the iceberg with most those brave enough to complain having been compensated already, the ones who stay quiet lose their shirts. As far as the FSA is concerned it needs evidence of 'systemic' frailure in the advice 'pyramid' at the banks. We all know the model is flawed but rules and regs are... er... rules and regs. we also need to remember that the whole lot of them could fall over during the next phase of this 'debt crunch' so perhaps for the 'greater good' the banking cannon fodder will pay the price.
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J Smith | 20 Aug 2009 12:55 pm
FOS sounds alarm over bank advice
The FSA doesn't want to investigate bank advice, because it doesn't want then to have to deal with the outcome of the investigation. An IFA would be closed down and probably made bankrupt for doing what the banks do.
It's high time the FSA made an expample of the worst offenders in banking and took non-financial action against them.
The senior management of the FSA are often ex bank staff and I've noticed that when they leave they often return to banking. I don't have to spell it out!
On the other hand, God help any IFA who's even a day late with the 1/2 yearly return. There will be a fine and a threat of disciplinary action!
The sooner the Conservatives get in Government and close the FSA, the better for the country's economy.
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Julian Stevens | 20 Aug 2009 1:05 pm
FOS sounds alarm over bank advice
"The FSA will not commit to a specific review of banks' investment advice despite the FOS expressing fears about a rise in complaints regarding investment advice given by bank staff." That says it all, doesn't it? About the only thing transparent about the FSA is its dismal pretence that it regulates the banks. It doesn't. Still.
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