FOS sounds alarm over bank advice

Aifa has called for an FSA investigation into bank advice after the Financial Ombudsman Service voiced concerns over an increase in unsuitable investment advice given to elderly people.

The FSA will not commit to a specific review of banks’ investment advice despite the FOS expressing fears about a rise in complaints regarding investment advice given by bank staff.

A FOS spokeswoman says: “Many of these consumers had only gone into the bank branch to make a withdrawal from a savings or deposit account but ended up being advised to take out an investment. It is particularly concerning that even when a consumer had explicitly referred to the fact that their main priority was to protect their capital rather than generate a return, they were still advised to invest in funds that put their capital at risk.”

The FOS received 1,809 investment complaints from people aged 65 or older between April and July this year. This represents 22 per cent of overall investment complaints and compares with 4,163 complaints for the whole of 2008/09. The FOS attributes this rise to bank advisers.

Asked if it will look to specifically review the advice being given by banks, an FSA spokesman said: “We speak to the FOS on a regular basis and where we come across complaints that warrant further investigation, we will factor that into our supervision of firms.”

But Association of Independent Financial Advisers director general Chris Cummings says: “It is no longer sufficient to say it will look at this under the normal supervisory process. It is little wonder that the FSA’s future is at risk when it fails to take action when presented with clear evidence of wrongdoing.”

In April, Money Marketing revealed adviser concerns about advice given by Barclays advisers to elderly investors to invest large sums in Aviva’s global balanced income fund.

In March, Money Marketing revealed concerns from Alan Steel Asset Management that bank advisers were selling corporate bond funds to savers hit by interest rate cuts without properly explaining the risks.

British Bankers’ Association executive director Eric Leenders says that 1,809 complaints is “a relatively low number compared with the millions of bank customers of this age group who save”.

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Comments

There are 15 comments at the moment, we would love to hear your opinion too.

  1. Concern over additional bolt-on misselling
    In addition to worrying statistics over misseliing investment products to the elderly, there has to be further investigation into other areas of banking including mortgages and in particular insurance add-ons.
    Bank staff are actively encouraged to push buildings or contents, life insurance even if this is not suitable or sufficient cover already in place. Ethics and good advice certainly seem to have been replaced by profit hunting and sales volume. How long can this go untested?

  2. FOS sounds alarm over bank advice
    Does this not once again send a message that that the British Bankers’ Association, the Banks and the regulator do not treat the Financial Services Sector on a level playing field. If measured in percentage terms Eric Leenders is right in saying that 1,809 complaints is “a relatively low number compared with the millions of bank customers of this age group who save”. But how many sales have they made that should be investigated before the FSA knock on the door of their biggest paymaster? The quality of advice via the Banks has been a concern for many, many years. If 1,800 complaints were lodged against IFA’s the FSA would be pressing for a review now.

  3. Banking on Bad Advice
    Tip of the iceberg, how many IFA’s have completed fact finds and when they have explained to the client what the Bank sold product is they are horrified as they understood they were just opening some other sort of account? They do not get told clearly enough they are not getting advice, they are mailed to come in for a review to ensure they have the best accounts for their needs and then are sold innapropriate investments. It is rife, but fi we think the FSA, FOS or anyone else will do anything about it, apart from expensive reviews and reports, then we’re dreaming.

  4. Neil F Liversidge 20th August 2009 at 10:59 am

    Bad Bank Advice – So What’s New?
    This sounds like an excellent case for one of the FSA’s famous thematic reviews. Except that it won’t hapen because the FSA’s bigwigs probably all hope to rotate to a well paid non-executive directorship with a bank in due course, just like many of their predecessors. They wouldn’t risk upsetting their likely future employers, would they?

  5. Ken Bannister (Active Weallth Ltd) 20th August 2009 at 11:16 am

    Bank Advice
    This is of course indicative of “close the stable door after the horse has bolted”. It is well know and documented that less than 3% of complaints come from the IFA community. The banks however, have over 50% of the complaints. I have experience of banking practice relating to financial advice and I can categorically confirm that the “sale” is most important as this generates points and as we know “points make prizes”. When will the FSA understand that in most cases bank advisers have a captive audience and it is therfore therir aim to sell to that audience without further thoughts of whether or not it is their best interests. If the advisers each carried their own PI cover and had to indvidually report to the FSA this type of miselling would plummet!

  6. Banks
    oh well, roll on 2012 – ‘normal’ clients will not wish to pay, or be unable to afford, fees for independent financial advice so the FOS/FSA can all look forward to much much more of this as the public is herded toward the Banks in even greater volumes. God bless the FSA, long live RDR!!!

  7. FOS Alarm on Bank Advice
    At last there would appear to be a more positive approach to this sector which I believe would if investigated indicate the largest mis selling ( you cannot call it advice) that has ever taken place in the UK’s financial markets to the consumer.

    I am surprised that the Consumer’s Association have not investigated this matter before now.

  8. “a relatively low number”??
    The FOS doesn’t need so see these complaints in the first place, in any event they are probably the tip of the iceberg with most those brave enough to complain having been compensated already, the ones who stay quiet lose their shirts. As far as the FSA is concerned it needs evidence of ‘systemic’ frailure in the advice ‘pyramid’ at the banks. We all know the model is flawed but rules and regs are… er… rules and regs. we also need to remember that the whole lot of them could fall over during the next phase of this ‘debt crunch’ so perhaps for the ‘greater good’ the banking cannon fodder will pay the price.

  9. FOS sounds alarm over bank advice
    The FSA doesn’t want to investigate bank advice, because it doesn’t want then to have to deal with the outcome of the investigation. An IFA would be closed down and probably made bankrupt for doing what the banks do.

    It’s high time the FSA made an expample of the worst offenders in banking and took non-financial action against them.

    The senior management of the FSA are often ex bank staff and I’ve noticed that when they leave they often return to banking. I don’t have to spell it out!

    On the other hand, God help any IFA who’s even a day late with the 1/2 yearly return. There will be a fine and a threat of disciplinary action!

    The sooner the Conservatives get in Government and close the FSA, the better for the country’s economy.

  10. FOS sounds alarm over bank advice
    “The FSA will not commit to a specific review of banks’ investment advice despite the FOS expressing fears about a rise in complaints regarding investment advice given by bank staff.” That says it all, doesn’t it? About the only thing transparent about the FSA is its dismal pretence that it regulates the banks. It doesn’t. Still.

  11. FSA
    Is there anyone the IFA community can complain to about the blatant double standards used by the FSA to regulate us v the banks? What about the European Court of Human Rights? At least it should provide some publicity. What about it AIFA? In the meantime, we should all highlight in the media all cases of bank misselling that we come across, not only through our own industry press. What about articles to local papers. They are usually pleased to receive articles for publication, including through letters pages.

  12. FOS sounds alarm on bank advice
    Well ! – surpise, surprise, who would have guessed that banks don’t always offer top-notch advice. And yet more wonderment – the FSA won’t investigate.

    The sad thing is that even if the useless FSA was decommissioned tomorrow, all their big wigs would be enrolled with the replacement regulator and the rules books will become even thicker. The political will to clear out the empire builders in the FSA, or to challenge the banks is simply not there.

  13. Further investigation
    I am reassured, as so many of your readers will surely also be !!! that when the FSA ‘come across complaints that warrant further investigation’ they ‘will factor this into their supervision of firms” t
    The only thing is that the spokesman didn’t include the rest of the sentence, ‘if it is a firm small enough for us to take on’. (Perhaps this was a ‘system error’, that part of the prepared statement didn’t come out of the printer!)

    In any event the only firms that the FSA is willing to take on are those that they can order to pay compensation, fine and who’s authorisation they can comfortably revoke.
    Obviously those that the FSA has borrowed from will be exempt and those that it has not borrowed from have already told the Govt. to push off, otherwise their most lucrative business’ will simply be relocated.
    The FSA will off course feel free to publicise the full details of those SME’s and their directors or partners that it does take on. After all it does have to make regulated firms’very affriad’
    How different it is for the banks! No naming of the bank, despite a multitude of infringments, no revoking of authorisations, either for the bank or individuals. A few fines, which the banks write off, against tax, as a cost of doing business in the UK.

    Again how different from the micro managing of my mortgage brokerage. I was told that ‘everyone had to be regulated in the same way’, regardless of whether they were a multi-billion £ international conglomerate or a one man band. Even when I pointed out that placing 40/50 mortgages per annum hardly qualified me as a threat to ‘market stability’ the ‘Quangoites’ still took the view that they knew how to run my business better than I did.

    When the lunatics don’t just run the asylum but write all the rules, without supervision, the only answer is to put them all out into the ordinary world.

  14. Send in the clowns.
    One cast iron fact is that the FSA will never do a thematic review in respect of bank so called ‘advice. It just will not happen, even though there has been some obscene ‘boot filling’ by the banks. They have much better things to do with their time in hitting the softer targets,those naughty little nuisance brokers. I have parents of 86 and 82 and you would not believe what a ‘respected’ hight street bank (chummy adverts) tried on until I intetrvened.

  15. BBA Comment
    Mr Leenders rather misses the point. It is not 1,809 complaints he is refering to, it is 1,809 complaint that the banks have failed to adequately deal with. If this is 1,809 out of say 18,000 then he may claimn his members are good at dealing with complaints but rue the very high numbers, or if its1,809 out of 2,000 then hsi comments are fair ones but he may then wonder why his members are so very bad at dealing with dissatisfied clinets. Perhaps he might like to tell us the ration of settled complaints to FOS referred comp-laints among his members.

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