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Banks review advice after FSA mystery shop

FSA Sky 480

Banks and building societies have been forced to retrain advisers and carry out past business reviews following an FSA mystery shopping exercise which revealed widespread failings in investment advice.

Money Marketing understands as a result of the review Santander has been referred to enforcement.

Firms have agreed to make substantial changes to their advice processes and controls for new business and employ an independent third party to either carry out or oversee any changes made.

The mystery shopping review was carried out between March and September at six banks and building societies. Of a total of 231 mystery shops, the adviser gave unsuitable advice in 11 per cent of cases, and in 15 per cent of cases the adviser did not gather enough information to ensure their advice was suitable.

The level of risk customers were willing and able to take was unsuitable in 15 per cent of the mystery shops, while the length of time the investment was held for was unsuitable in 6 per cent of cases.

Advice disclosure was unacceptable in 42 per cent of mystery shops as advisers failed to give customers the correct information.

The FSA says it is concerned advisers in some banks and building societies “continue to make a number of basic financial planning errors”.

Examples of poor investment advice cited by the FSA include one adviser telling a client: “You don’t pay me a penny [and] you don’t pay the bank a penny for this advice.” In another case, the adviser set up an investment on a 20 year term despite the client wanting to invest for five years, saying the client could benefit from “better growth potential”.

FSA director of supervision Clive Adamson says the regulator is disappointed by the results of the review, but is encouraged by the action firms have taken in response.

A British Bankers’ Association spokesman says: “Any examples of advisers failing to gather enough information on their customers and not recommending the right products are unacceptable. This review will help all banks to focus on retraining staff and changing processes to improve standards for customers in the future.”



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