Have the high-street banks begun trembling in their boots following FSA chief executive Hector Sants’ revelation that the regulator is to instigate
a crackdown on bank advice?
Speaking at a Which? hearing about the future of banking last week, Sants admitted the FSA’s supervision of banking advice could be better.
He said the FSA intended to “improve significantly” the quality of bank advice through more rigorous proactive regulation and increased deterrence.
One of the biggest criticisms of the regulator levelled by advisers in recent years has been its failure to stamp out the poor practices of some banking organisations offering their customers “advice”. Many IFAs have been left to pick up the pieces for clients after their shoddy treatment by bank and building society advisers more interested in meeting their sales targets or promoting the latest product they had been incentivised to sell.
There is considerable resentment about the way that some banks have marketed their sales advice to customers and been responsible for so
many upheld Financial Ombudsman Service claims, yet IFAs have been given a rougher ride from the regulator.
For years, the FSA has had at its fingertips all the evidence it needed that there were problems in this area but failed to act. What makes us believe that a regulator, perhaps coming to the end of its shelf-life, will now be bold enough to change the way that banks behave?
Ominously, when pressed as to whether such a crackdown could be brought in alongside the RDR, Sants told the Which? hearing this was
dependent on resources and the ability of the banks to absorb change.
At the same hearing, Lord Turner said the FSA’s powers to change the culture of banks were not limitless.
But it should be well within their powers to ensure some banks change their bonus and incentive structures to ensure clients are not being
ripped off or landed with financial products they do not need.
Protestations from bank bosses that standards are improving are not borne out by FOS claim statistics or mysteryshopping research from Which? which recently found that, out of 37 branches of banks and building societies it visited, only four offered good advice.
The FSA needs to make raising bank advice standards a priority and be ready to hand out severe punishments to institutions that continue to let down their customers.