Only one of 39 advisers gave appropriate advice to mystery shoppers from Which? magazine posing as first-time buyers looking for protection alongside their mortgage.
While 11 advisers recommended the appropriate type of cover to fit the profile of the researchers – income protection – just one advised a sufficient amount of cover.
Of 30 advisers who offered one or a combination of protection products, 25 recommended critical-illness cover but only three explained what conditions were and were not covered. Some advisers resorted to shock tactics when recommending CI.
According to Which?, 23 advisers recommended unnecessary life insurance.
Confusion with regulations was also apparent, according to the report. One adviser said he was required by regulation to recommend mortgage payment protection insurance and a Countrywide adviser said he would have to go through PIA recommendations although the PIA no longer exists.
In total, 39 advisers working for banks, building societies and estate agents were visited during the year-long exercise by the research arm of the Consumers' Association.
Which? editor Malcolm Coles says: “We think the FSA needs to do its own mystery shopping and fine any company that breaks the rules.”