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FCA fines Santander £12.4m over poor investment advice

The FCA has fined Santander £12.4m for poor investment advice after a mystery shopping exercise in 2012.

The regulator found there were “significant deficiencies” in Santander’s suitability processes and in ensuring that financial promotions and communications were fair, clear and not misleading.

The bank also failed to carry out regular reviews to check that investments continued to meet customers’ needs and that the service promised to customers was actually provided.

The FCA says sales of retail investment products between January 2010 and December 2012 were affected, and some of its promotions and communications with customers from as early as April 2004.

The FCA says the failings were “systemic” and related to a large number of customers, including some who may have been vulnerable due to their age or personal circumstances.

Santander is writing to affected customers to offer them the opportunity to withdraw from their investment or have a review of the sale; conducting a redress exercise for premium investments customers; and implementing a new annual review process for customers who remain invested in premium investments.

FCA director of enforcement and financial crime Tracey McDermott says: “Customers trusted Santander to help them manage their money wisely, but it failed to live up to that responsibility.

“If trust in financial services is going to be restored, which it must be, then customers need to be confident that those advising them understand, and are driven by, what they need. Santander let its customers down badly.”

Following a Dear CEO letter from the FCA in June 2011 regarding wealth management services, Santander instructed external consultants to review its premium investment sales.

The review of 50 sales in the first half of 2011 found that only 58 per cent were suitable, and identified concerns including inadequate customer profiling and recommendations to customers with insufficient capacity for loss.

Santander told the FCA in August 2011 its tools and processes were working well to deliver appropriate outcomes “for the great majority of customers”. The FCA says this response was “misleading”.

Santander head of UK banking Steve Pateman says: “We regret that elements of Santander UK’s historic branch-based investment sales processes did not meet the required regulatory standards and apologise to any customers who have concerns. We expect customer detriment to be low given the performance of the underlying investments and, as the FCA acknowledges, Santander has seen very few complaints from customers.”

In November 2012 the bank set aside £232m, saying at the time the provision related to undisclosed “historic customer conduct issues”.

In February 2013 Money Marketing revealed the regulator was investigating Santander over the quality of its investment advice.

In March 2013 Santander confirmed it had pulled out of investment advice, after pulling 800 advisers off the road because they were not fully trained to meet RDR requirements. 


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There are 7 comments at the moment, we would love to hear your opinion too.

  1. Derek Bradley ceo Panacea Adviser 26th March 2014 at 9:16 am

    “after a mystery shopping exercise in 2012”.

    Not a month goes by without yet another bank being fined for advice failures. Every fine simply places another layer of distrust on the industry, doing more damage to the image and reputation of those giving financial advice who do a good job.

    I think the time has come to have a “Truth & Reconciliation” period where the regulator and the firms in question come clean on what is being looked at, accept guilt and pay ‘compo’ where appropriate and then draw a line.

    It is simply unacceptable that banks, in particular, who have done so much consumer confidence damage simply get away with this type of conduct, only to seemingly be ‘rumbled’ again a few months later for the same type of bad behaviour.

  2. One can only assume that the pressure to ‘sell’ and a lack of appropriate controls, checks and balances results in this risk to clients.

    The biggest fear I have is the sheer volume of people who were exposed to this approach. IMHO there is no place for ‘sales targets’ when you are dealing with peoples livelihoods and financial plans as this CLEARLY results in conflict of interest – but seemingly many organisations turn a blind eye to this consumer detriment.

    Anecdotally, I once had an elderly client offered a Corporate Bond fund to her by her Bank as an alternative to the maturing cash deposit which she wanted to replace. The focussed on the yield – not mentioning the fact that capital was at risk.

  3. As far as I can see the regulator who incidentally turned a blind eye to what was well known about banks for years and years has now started applying retrospective sanctions. The banks were encouraged to ‘fill their boots’ for years under their watchful eye and whilst this might go some way to making them actually act for their customers and not their shareholders I seriously doubt this is but a drop in the ocean.

  4. goodness gracious 26th March 2014 at 11:28 am

    The pressure of making advisers have 12 first appointments and maybe 6 second sales appointments means the Know your customer requirements could not be met adequately. Ant risk profiling tool should be only the start of the process of really understanding clients needs, wishes and attitude.
    I once went for an interview with Santander and ran through a mock sales scenario. Having dealt with risk attitude I then queried the clients capacity and investigated further the mis-match with their risk and their objectives, then advised them that a lower risk investment made it reasonably likely that their objective may not be met. How would they like to proceed? They could take a higher risk but it would make demands about capacity for loss, or maybe they would like to be a little more realistic and reset their objectives. This stumped Santander regional managers and they told me that in their opinion I had breached the then FSA rules as clients had wanted a lower risk and talking about a higher risk would lead to an unsafe sale. I replied that it bought up a capacity for loss issue but it could be further discussed, it is my job as an adviser to look at what return would be needed to get clients objectives met.
    In their view the company rules regarding cash reserve would in almost all cases, satisfy the capacity for loss issue and a sale of a FTSE 100 linked structured plan would satisfy the low risk with higher potential return issue. This was some 5 years ago and the eventual annual return for the product was about 3.5%, miles short of clients objectives.
    I did not get the job, unsurprisingly!
    I didn’t get the job!

  5. During my time at a Peterborough based home service company that was taken over by an Australian company there was a requirement in my time for Sales Managers to inspect their Area Manager sales calls to ensure they had 15 appointments for the following week. Can you imagine how difficult it was to achieve this week in and week out? The better Sales Managers (In my opinion) allowed a degree of differential management to happen and turned a blind eye to the fact it was nearly impossible to achieve this. However, the so called Senior Management at this firm wanted to drive this with a big stick, threats and bullying. What a dreadful company to work for this company became. The company in question no longer services their clients investments on a fact to face basis as they withdrew from the home service market years ago so I would like to know how this squares off against the FCA thinking it is a breach the client isn’t being contacted by anyone to establish if their investment is still suitable? Santander today, just about anybody tomorrow. But not if you’ve already run away from your responsibilities perhaps?

  6. 15 appts the following week??? That is a part-time job. I am 18 months on from being ousted from a bank with an animal in the logo, and our weekly target was 30 appts per week. 5 firsts and 1 second. If we did not have this pre-booked, you had to attend a compulsory ‘telemarketing’ evening between 6-8pm in some far away branch. A great motivational tool as you can well imagine. Suffice to say anyone worth their salt and had integrity just made it up. I cannot recall the amount of times staff members and friends appeared in my diary! This was an environment that had league tables for selling crappy whole of life plans. If you had not sold 5 by the end it’s first month, you were summoned to a regional ‘telling off’ session. Suffice to say I told them to stuff it, questioned where the league tables for income protection was…argued the toss and got told I was unmanageable!! Lol. Being made redundant was the best thing that ever happened to my career. Been an IFA for 9 months and loving it.

  7. Mark Harvey | 26 March 2014 8:41 pm

    Ridiculous how out of hand this industry was allowed to develop in the banking world.
    I get back to my point; where was the regulator at the time who would obviously know this was being forced upon advisers?
    Their mystery shopping exercise last year saw that clients weren’t being looked after properly.
    Last year – the mind boggles.

    The guys I was talking about though had to see all their clients out of the office and some of them had areas covering hundreds of miles in places like Northumberland. It was a terrible environment to work and having been involved with home service since 81 it felt at the time like the world had gone mad.

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