Which? slams 8.8% commission bank advisers
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Which? has slammed bank and building society advisers after 32 out of 37 gave poor investment advice to its mystery shoppers.
The consumer group has urged investors to see an IFA for financial advice.
Researchers carried out the mystery shopping exercise between August and October. They found that just five of the 37 tied high-street advisers gave good advice while four out of six IFAs offered good advice.
Which? assessed the quality of advice according to whether advisers disclosed their status as tied advisers, explained the Financial Services Compensation Scheme, carried out a thorough fact-find, clearly established the customer’s attitude to investment risk, discussed tax issues and fully explained the product being recommen-ded and its fees and charges.
Clydesdale and Yorkshire Banks failed on all four visits while Co-operative and Britannia advisers passed one of three visits.Five out of seven advisers at the firms, who were all employed by Axa, recommended an Axa investment bond that pays 8.8 per cent commission. They told shoppers that the advice was free, despite it being worth £4,400 in commission.
Skipton Building Society, Yorkshire Building Society, Royal Bank of Scotland Group and Lloyds Banking Group advisers also failed to give good advice on all four visits. HSBC advisers passed two of three visits but Which? says the third adviser was one of the poorest, explaining complex investment options using lots of jargon.
A NatWest adviser told a Which researcher: “let’s face it, the major banks aren’t going to go under,” and handed them a leaflet about compensation, saying: “you don’t have to read this”.
Four out of six IFAs tested were up-front about their independent status and charges and gave suitable advice. The other two incorrectly assessed the shopper’s risk profile and so recommended unsuitable products.
Which? executive director Richard Lloyd says: “Our investigation shows that the high street is not the best place to go for investment advice. If in doubt consumers should always talk to an IFA.”
Derbyshire Booth Financial Management managing director Greg Heath says: “This shows a lack of professionalism and IFAs are often left to clear up the mess.”
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Readers' comments (29)
Sean | 16 Nov 2011 8:30 am
So someone tell me how is RDR is going to benefit the man/woman in the street?
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Vince | 16 Nov 2011 8:53 am
Quel surprise !!!
The FSA will, no doubt, be delighted and pay themselves, from our pockets, yet more huge bonuses.
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Chippy Minton | 16 Nov 2011 8:53 am
Sean - Whilst I disagree with a fair amount of RDR it should rid us of the 8.8% commission merchants and the idea that advice is free.
HOWEVER...I suspect that this kind of practice will continue long after RDR and the FCA will turn a blind eye to it, unless of course, that its an IFA that is responsible.
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Steve | 16 Nov 2011 8:54 am
Where's the fines then Mr regulator? If the IFA community was guilty of such high levels of unsatisfactory advice and commission bias, there would be a blood bath.
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Paul | 16 Nov 2011 8:57 am
And when will this information be pasted all over the front pages of the national press????????????
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Martin Card | 16 Nov 2011 9:00 am
I agree with Sean. Initially RDR is simply going to push the man on the street towards the banks to receive shocking service such as this. I hope that by the time people realise where the valued advice is it is not too late.
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Anonymous | 16 Nov 2011 9:06 am
Ironic that the timing of the Which survey is so close to the FSA's own review, and yet the results differ so materially.
The elephant in the room that is commission rates at such revolting levels for bonds is clearly leading to bias at the banks as their sales staff try to hit their targets for te annual top table trip to Monaco as has been the case since before regulation began, and yet like goal-line technology in football, logic does not prevail.
How a client can ever recover and get value from a product that has an 8.8% hit is beyond me, but don't hold your breathe that anything will happen. Insurers should hang their heads in shame for allowing theis to happen in their own headlong charge to hit targets and show little if any interest in the most important person in the whole charade - the client.
I am embarrassed that this sort of 1980's culture still exists but it is up to the FSA.
It would be so easy for them to ask all firms for a list of clients who were sold products at a price of say in excess of 3% initial charge (the tipping point for product bias) but opening that can of worms is at odds with helping state owned banks to recapitalise, as it could lead to many banks having to undo most of their advice at a huge cost.
As I said, don't hold your breathe!
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phil | 16 Nov 2011 9:07 am
sadly just more echoes of the above really, but the 8.8% is not the issue as of course fees could amount to this equivalent on some (perhaps smaller) investment figures.
the issue surely is more to do with the fact that the consumer was mislead and somehow the banks still get away with outright lies.
anyhow, come 2013 of course ALL of this will change... the word commission will disappear, thos eof us that have offered and charged fees where appropriate in the past will continue to do so and the Banks will simply have their 'customers' sign documenation to hide the fact that commission is commission and a simple rebrand of terminology solves nowt.
don't get me wrong, fees make no sense for at least 80% of our clients - ie Mr & Mrs 2.4 kids and a dog, but they know and understand their options etc
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Anonymous | 16 Nov 2011 9:11 am
But the good news is the bank's sales team will all make the annual trip to Monaco as part of the 'top table' by ripping the ar@e out of their client's investments and destroying any value.
This has been an issue since before regulation began, and yet like goal-line technology in football, logic does not prevail.
How a client can ever recover and get value from a product that has an 8.8% hit is beyond me, but don't hold your breathe that anything will happen. Insurers should hang their heads in shame for allowing this to happen in their own headlong charge to hit targets and show little if any interest in the most important person in the whole charade - the client.
I am embarrassed that this sort of 1980's culture still exists but it is up to the FSA.
It would be so easy for them to ask all firms for a list of clients who were sold products at a price of say in excess of 3% initial charge (the tipping point for product bias) but opening that can of worms and seeing what banks get up to is at odds with helping state owned banks to recapitalise, as it could lead to many banks having to undo most of their advice at a huge cost.
As I said, don't hold your breathe!
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Anonymous | 16 Nov 2011 9:11 am
I agree with the other comments RDR is designed to push IFA's out of business and promote advice through the Banks.The IFA community have never had proper representation or the teeth to fight back. The fact that most of us are to be called restricted Advisers is just proof that the RDR system is biased against us... who the hell thought up that title ?
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