Santander investment advisers told customers that commission of almost 8 per cent was “irrelevant” and classed investors who said they “did not want anything risky” as high risk, an FCA investigation has found.
The FCA has fined Santander £12.4m after finding “significant deficiencies” in the bank’s suitability processes, communications and training of advisers following a mystery shopping exercise into six banks and building societies in 2012, including Santander.
The mystery shop into Santander found 22 per cent of advisers provided misleading product information, and 28 per cent provided misleading information about costs.
In one instance, a customer was told commission was irrelevant and they would not be paying commission, when in fact commission was 7.75 per cent.
Another customer was told “in 10 years the investment will beat cash by 87 per cent”, even though their investment term was only five years and the returns were not guaranteed.
Other misleading statements included an adviser suggesting an investment “will likely double” and incorrectly stating the “FTSE was 8,000-9,000 in 2008”.
The mystery shop also found that in 15 per cent of cases advisers made misleading statements, and did not explain or did not provide documents in relation to Financial Services Compensation Scheme protection.
This is despite Santander being fined £1.5m by the FCA in February 2012 for unclear disclosure of FSCS protection on structured products.
The investigation also found the bank’s risk profiling questionnaire inappropriately led customers towards certain answers or was not completed properly by a quarter of advisers.
In one case the questionnaire assessed a customer as high risk when they had said they “did not want anything risky”.
Significant suitability failings were also identified, including an adviser recommending a customer invest £40,000 in a high risk investment without gathering full information on their assets and outgoings, and without recommending the customer consider paying off credit card debt before investing.
In another case, an adviser recommended that a 71 year old customer invest £35,000 into a product with a six-year term and which contained penalties for early encashment. This was without determining the customer’s income, expenditure, debts or liabilities, or whether they had any health issues.
Advisers also ignored customers’ desired term of investment, with one recommending a customer invest £30,000 in a medium to long-term investment despite the customer requesting a short-term investment of three to four years.
The investigation identified concerns with adviser training, with advisers receiving no training on the systems they would use during investment sales prior to their first meeting with customers.
An assessment on day one of a course for new advisers had a pass rate set at 70 per cent by HR without sign off from compliance. The pass rate in place at other courses was 80 per cent.
The FCA found that had the pass rate been set at 80 per cent, 41 per cent of advisers who completed the test in the third quarter of 2011 would have failed and not been allowed to complete the course.