View more on these topics

Aggressive banks pushing risky products

The FSA has warned that banks are pushing consumers into complex wealth management products that are unsuitable and are using “aggressive” sales incentives to motivate staff.

In its retail conduct risk outlook this week, the regulator warns that the retail banking channel has increasingly been used to sell complex investment products such as structured products.

The FSA is concerned private banking clients may be persuaded to take more risk with their investments than they want to as aggressive sales incentives push staff to highlight product benefits and downplay risks.

The FSA says: “A potential risk we see in this area is banks inappropriately selling to affluent and mass affluent customers, either by up-selling them into private banking or by offering, via their retail banking arm, wealth management products that are not suitable to customer circumstances. Poor risk profiling may have already resulted in the up-risking of some retail customers.”

The regulator is carrying out an investigation into conduct of wealth management firms after it identified poor practice among banks’ wealth management subsidiaries and independent wealth managers.

It found cases where clients’ risk levels had been increased, complex and expensive products were recommended and data had been used which understated risks.

Technology & Technical managing director Kim North says: “Where staff are driven by sales targets the culture is always going to be about flogging products.”



ABI to scrap “cautious” and “balanced” fund labels

The ABI has announced an overhaul of managed fund sector labels from April. Sector names including “defensive”, “cautious”, “balanced” and “flexible” will be replaced with “mixed investment” and accompanied by a clear statement of how much each type of fund can hold in equities. ABI acting director of life and savings Helen White says: “It […]

BlackRock’s Lyttleton opposes Woodford on pharm opportunity

BlackRock UK equity fund manager Mark Lyttleton disagrees with Invesco Perpetual income manager Neil Woodford’s view that pharmaceuticals represent a major opportunity in the market. Speaking at the Fund Strategy Investment Summit in Austria last month, Woodford said that the pharmaceutical sector represents one of the best investment opportunities in his career. Lyttleton, who manages […]

Henderson profits surge but it faces £7.6m FSCS levy

Henderson has received a £7.6m interim levy from the Financial Services Compensation Scheme as it announced a 37 per cent increase in profits for 2010. Underlying profit was £100.7m compared with £73.7m in 2009 and assets under management rose by 11 per cent to £58.7bn. The company has seen higher margin inflows of £2bn in […]

Platform to remove products due to high demand

Platform has withdrawn a number of buy-to-let products due to high demand. It will remove its one, two and four-year fixes, which will not be replaced. Platform is also removing a variety of one and two-year trackers. The products will be pulled from the range on Monday. However, the lender will introduce a selection of […]

Graphic Content – August

Given the release of employment data from the US on 5 August, we wanted to focus on employment data in this month’s Graphic Content. The Graphic Content below shows us that young and middle-aged workers were hit the hardest by the Great Recession and have never caught up. Since the job market started to recover […]


News and expert analysis straight to your inbox

Sign up


There are 5 comments at the moment, we would love to hear your opinion too.

  1. So what action are they taking about it?

    Are these the same banks that want their HNW clients exempt from RDR?

  2. What action are they taking Sean? Well that would be their usual of saying its the fault of IFAs. 🙂

  3. Bankers bonuses often hit the headlines, but the counter staff and other staff in banks who are not management or even financial advisers have to find leads to retain their jobs, it is this sourcing of leads which needs ending in banks.

    This is the system which creates the problems, naming staff ‘clerks’ then giving them lead targets, naming people ‘account managers’ then forcing them to find financial and mortgage leads creates these issues.

    They lose their jobs if they do not generate leads, the wrong consumers are bound to be put forward under this type of system.

  4. Sean, please. The FSA are working hard (to earn their bonuses) “carrying out an investigation” – and will then, if they can understand the scale of the situation (which IMHO is highly unlikely) levy massive fines on IFAs! Simple.

  5. Since time immemorial, these types of practices have been established bank policy. A friend of mine who was a counter clerk for the Midland Bank was grumbling as long ago as the 1970’s about constant pressure from above to steer customers towards colleagues who could sell them some sort of financial product and make more money out of them. How can it possibly have taken the FSA this long to get round to doing anything about it?

    No IFA has ever claimed our sector to be perfect, but it’s abundantly clear that the way in which banks routinely hustle their customers to invest money into products of dubious quality with high charges, high commission and nothing in the way of after-sale service is a vastly greater issue than a relatively few IFA’s failing to cross all the t’s and dot all the i’s on pension fund transfers or selling mortgage-related endowments on the strength of illustrations mis-priced on the instructions of the regulator of the day.

    Just this week, I visited a new client who’d recently inherited a sum of money from which he requires income and growth. HSBC had advised him to invest £130,000 into their World Income portfolio with income being drawn from day one (aren’t you supposed to wait 12 months to allow some income actually to accumulate?) and without even having recommended utilisation of his wife’s ISA input allowance. The client didn’t have a clue what he’d been sold, but he balked at £4,000 commission, so he sent in his cooling-off notice and decided he ought to seek advice elsewhere. Such stories are commonplace, but the FSA (and the PIA before it) have routinely turned a blind eye to them. One wonders what’s prompted a change of regulatory policy at this late stage in the game.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers. Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm