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‘8% commission is irrelevant’: How Santander investment advisers failed customers

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.


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. There comes a time when you start having less sympathy for investors who continue to go to their bank for ‘advice’.

  2. Sadly there will be very few IFAs that did not suspect that this was the general practice and experience of people going to Banks for advice. It still perplexes me that people do, is this nothing more than the power of branding, a sense of loyalty or familiarity? Never underestimate the power or inertia. However we have suspected and known that this was widespread and am left to ponder why it takes so long for the regulator to call Banks to account, when we know they have the biggest market, most impact and do the most damage.

  3. Martin Bamford | 26 March 2014 10:57 am

    There comes a time when you start having less sympathy for investors who continue to go to their bank for ‘advice’.

    Having worked at a bank for a short period and what a dreadful place it was, it never ceased to amaze me how many customers walked through the door with cheques already made out the bank and wouldn’t even consider asking for advice any where else. Then there was the Key Facts Information that showed how much the banks were charging (yes, I went through these properly) for the privilege of handing over their money and they never bat an eye. How we defend ourselves from stupidity is a mystery to me.
    These are the same people who said; I trust the bank because they’ve always looked after me. I wonder if they’re still saying that today?

  4. goodness gracious 26th March 2014 at 12:36 pm

    So Santander were about the same as most other bankassurers then!

  5. Maybe now we can put to bed the positive impact RDR has had on the bankassurance market by removing these organisations from the advice industry. I get so frustrated when I hear advisers stating that “although it may not have been great advice, it was still advice and the exit of banks has created an ‘advice gap’”.

    No – Bank advice created the problem in the first place, by pushing people who should never have been investing in the first place into overpriced, poorly designed, underperforming products that only served to make the bank money.

  6. I’ll bet the other five banks/building societies (and probably more) are all sweating cobs over what’s probably barrelling down the pike towards them from the FCA.

    Given that such practices are extremely rare in the IFA sector again begs the question as to why the FCA is determined to keep its flame throwers directed at us when, by and large, with only a few unfortunate exceptions, we’re paragons of integrity and thoroughness.

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