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FSA attacks banks over aggressive selling tactics

Margaret Cole

The FSA has attacked banks and large financial services firms for basing their business models around aggressive selling tactics.

Speaking at a conference held by Which? on financial services reform in London this morning, FSA interim managing director of the conduct business unit Margaret Cole rejected claims made by British Bankers’ Association executive director of retail Eric Leenders that many consumers continued to trust high street banks.

Cole said: “I am not in the business of banker bashing, but I do have to say if you look at the evidence unfortunately in relation to payment protection insurance, which has been the most recent saga, it was really the big retail banks who were the major players.”

She said misselling issues have emerged over the last 20 years which have cost consumers £15bn, not including the £9bn cost of PPI misselling.

Cole added although the Financial Conduct Authority will have new powers to intervene where it sees consumer detriment, such as  product bans, it is also up to banks to develop a “cultural responsibility” so that the regulator needs to intervene less often in the first place.

She said: “It is particularly striking to me that when we have been doing more business model analysis we see how much of the business models of major institutions are being driven by aggressive product sales. If that remains the business model there is always going to be a high risk of misselling of products.

“We have to be prepared in the new culture of the FCA to be more interventionist to head off those issues before they really get going.”


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There are 30 comments at the moment, we would love to hear your opinion too.

  1. Well well the FSA have finally realised that banks have been ripping consumers off. Regrettably the FSA did not say that as from 01/01/2013 the only place for those who cannot afford to pay a fee will be you’ve guessed it the banks. Well done FSA

  2. Have these people simply been asleep for the last couple of decades?

  3. George Williamson 27th June 2011 at 2:06 pm

    Ony 10 years late with that conclusion – if I was that slow at my job, I would be in clear breach of TCF and subject to FSA censure!

  4. She said “misselling issues have emerged over the last 20 years which have cost consumers £15bn, not including the £9bn cost of PPI misselling”
    She could have added “Although we at the fsa have always known about this, we turned a blind eye to our “buddies at the banks” wrongdoing and concentrated instead on those annoying little IFAs who do not have the money nor the political clout to answer back. That way, we look so busy, we can ask for millions to be added to our budget each year in order that we can attract the best people like myself who can rapidly pinpoint where the trouble stems from.

  5. Is that a horse I can see running round the field outside the stable….best close the stable door then…

  6. I still find it strange that the FSA report into the Barclays/Aviva debacle made no reference to the amount or rate of commission generated by “selling” the Aviva product rather than an alternative.

    Regardless of whether it is a bank, large IFA/advisory firm or small firm, if salesman/advisers are rewarded by hitting sales targets there will be agressive selling. Advisers can fill their boots by flogging inappropriate products and then move on to another firm or industry.
    On a separate issue i have today picked up a new client who was previously been advised by Barclays IFA division. She tells me she has “been left out on a limb” with no assistance from Barclays. Good for me, but an indication of how some members of the public are being left without advisors.

  7. Banks are a business, businesses are out to make profit – that’s fine. the old boy network in the city and the untouchable nature of banks has been going on too long. Even the Bankers who have been put in charge of the banks we now own are turning out to be dirtbags. they need jailed the lot of them and send them to a proper prison where they will be “integrated” into a new “old boy” network

  8. Yes let the bankers get put in jail and see what loving your fellow man is like – but not in the way that they would like it…..although some of the public school boys prbably will

  9. Wow, the banks sell aggressively (and not often to a clients’s needs) according to the FSA! And what’s more, His Holiness is a catholic! And as for bears……

  10. To little to late FSA. If I was that late paying your fees and and making sure all the other paperwork you’ve got brokers to do is in on time, I would have been de-registered by you.
    You (FSA) have been licking the bank’s …. umm feet for years.

  11. You really couldn’t make this stuff up!! After all these years & the £billions spent, has the penny finally dropped?
    Stable doors & horses spring to mind.
    The FSA have all but decimated the IFA sector (& will continue doing so to avoid losing face) & have paid themselves god-knows how much in “performance” bonuses whilst being asleep at the wheel.
    Will anything change – almost certainly not.
    Aggressive sales targets + expensive, opaque products = consumer detriment. No analysis or modelling required to see that.
    I am beyond staggered. MP’s – you should be ashamed of yourselves for allowing this abuse of power to continue.

  12. Then why aren’t you doing something about it Mrs Cole?

    3 months to change their business model or withdrawing their permissions might be good.

  13. I had to chuckle when I saw Cultural Responsibility. Great thought, but with big bonuses at stake it will be a non starter. They will tell us next they are doing it for nothing, mind you they tell the public that already & that Father Christmas pays the wages every friday!!.

  14. Christine Liggins 27th June 2011 at 2:42 pm

    Anyone who’s worked in RaRa Retail banking within the last 10 years will be well aware of their bullyboy sales tactics. Unfortunately the general public have been lead to believe that customer facing bank staff have done this for personal gain to earn ‘big bonuses’. Those in the know will tell you, in many cases, they have felt the need to push sometimes unsuitable products to clients who do not know better simply to enable them to hit inflated sales targets, not to earn bonus, but to simply to keep their jobs.

  15. talk about stating the bleeding obvious

  16. I guess we need to congratulate the FSA on reaching the required level of awareness, QCF1 possibly.

    The tactics of the banks hit us all because many consumers fail to differentiate betwen advisers (us) and advisers in the banking world.

    What a shame their consumer responsibilities and those of MAS don’t extend to guiding consumers towards independent advice as a first stage in aiming for financial prudence.

  17. Lindsay Bateman 27th June 2011 at 3:11 pm

    The FSA has to be seen to ba taking more action – not just commenting from the sidelines. This year good progress has been made – but too many consumers are still up against the banks trying to obtain redress on investments such as the so-called “100% capital protection” structured products, and other complex high risk products designed to benefit the issuing bank – not the client. The culture in banks is all about cross-selling and increasing revenue from client relationships – not focussed on long term relationships based on mutual benefit and trust…

  18. Really ? I don’t believe it ! Finally……

  19. deeply deppresed 27th June 2011 at 4:37 pm

    good news the FSA know the banks are peddling expensive unsuitable products, the question now that needs asking is what are they going to do about it, answer nothing, ziltch, they are just going to fine the socks off the banks to pay the bonus’s for the clowns at the ivory towers.

  20. Oh, poor little consumers. All that paperwork they were expected to read through to understand a product they were buying – of course they couldn’t be expect to be repsonsible for their own buying decisions. Oh, and all those people who benefited from payouts on their PPI obviously also thought it a waste of money. Funny how consumers spend hours/days/weeks choosing a new car (what brake horse power, mpg, cost of servicing etc) and seem perfectly capable of reading paperwork then (even asking if they didn’t understand) yet, when it comes to PPI, they appear to suddenly become mentally challenged and illiterate! If you don’t want to buy something, don’t buy it, if you don’t understand something, don’t buy it., If you’re not sure, take it away, research it, then decide whether to buy it.

    I’m not saying what the banks did was right or moral in any way, but I’m sick of this nanny culture that assumes that the consumer has absolutely no responsbility for any decision they make -whatever happened to buyer beware!

  21. The complete and UTTER failure by the FSA to spot this misselling by pressure is mind boggling.
    The average school leaver with no training could have spotted and thought, ‘ well, maybe we should treat the cancer of the banks at the source, and not try and irradiate the whole body of the financial services sector by insisting that they ALL completely requalify’. That would have been a start.

    Requalification does NOT protect consumers against misselling. It is in smallpart, a failure in technical knowledge, but primarily we all know ( well, any of us with a grain of sense), the driver is all about profit, coupled with lack of morals. This driver can be forced down through management in large organisations to the customer facers ( I came across a NatWest adviser on the brink of a mental breakdown due to targets pressures).

    The FSA has displayed ABJECT FAILURE in this examinations matter and I just hope they know in what disgust the average IFA holds them.

    I have not yet come across a single policymaker at the FSA ( inc. Mz Cole) who I would employ to sell copies of The Big Issue, let alone opine on the workaday things that we IFAs face, year in year out.

  22. Please do not blame the bank staff too much here. Many of the people on the bank floor were under pressure to reach sales targets or be ‘counselled’ for under-performance. These individuals were not that highly paid and came under immense stress at times.

    They were forced to attend training courses aimed at ‘helping’ their customers (sales!). Many were forced to leave after years of loyal service. And I assure you their bonuses, if any, were around a few hundred pounds.

    Not your fat cat banker at all.

    When Geoghegan was appointed CEO of HSBC a few years ago (now gone!) the first thing he said was either ‘sell or go’ – even releasing a video saying how some people would be better off leaving!

    From FPMs to retail staff, all had to sell or go! But please consider the plight of the poor bank worker who had to earn a living doing stuff they hated!

  23. “misselling issues have emerged over the last 20 years which have cost consumers £15bn, not including the £9bn cost of PPI misselling.” Well spotted Ms. Cole ~ we’ve all been trying to tell the FSA this for a very long time and only now, in the wake of the MPPI mis-selling debacle, not to mention the Barclays/Aviva one, you’re finally talking about the need for a change of culture within the banks. How about stipulating that the organisations concerned must commission skilled persons reports into their ingrained selling practices, i.e. pile ’em high and flog ’em hard to all and sundry?

    The root of the problem seems to be the enormous revenue targets that bank advisers are required to meet to validate their salaries ~ 10x is not uncommon, compared with commonly 2.5 to 3x for IFA’s. If you’re on £30,000 p.a. how can you possibly hit £300,000 of sales revenues without over-charging and cutting corners massively? The short answer is that you can’t.

    The other thing, of course, is that people selling financial products for banks aren’t advisers ~ they’re salesmen and shouldn’t be permitted to call themselves anything else. When’s the FSA going to grasp that particular nettle? Ever or never?

  24. In 1992 a bank (IFA) advisers salary was £17,500, bonus of about £1k, plus company car, final salary pension and 4 weeks holiday. Annual commission target to cover it was £100k. 95% of advisers were below 70% of target and many were pretty stressed out as a result.
    I can’t see that it has improved much since

  25. I was a bank adviser between 1991 and 1994; in 1993 my salary was a shade under £30,000, I was top producer nationally and received the same bonus (10% of salary) as those that had written target which was circa £200,000. I left in 1994 as I was disgusted (even then) with the shoddy way in which the on the floor bank staff were treated, being forced into sales situations and with ever changing job descriptions. The final straw for me was being told that there was to be a “no-rebate” rule on commission generated, unless the total was “well in excess of £10,000”.

  26. Why is it that major banks are getting away with clear breaches of FSA rules and none of the senior directors of these organisations are in the dock.

    There has been no sanctions taken against any senior directors for clear breaches in running structures that are clearly at fault.

    The faults of banks on numerous and at no stage has a senior bank official been made responsible for the structures that they are in charge of, surely this is a major question that needs to be answered by the FSA when it is so quick to de-authorise and fine smaller companies.

    The only senior director but I know of that has been sanctioned to never work in financial services in a control function, was the Chief Executive of Northern Rock, which seemed to be hung out to dry as the only sacrificial lamb. Is interesting to note that the fine that was levied against him was relatively small compared to his earnings over the years and there was no prison sentence for false reporting.

  27. It does seem that the penny is starting to drop.The complaints numbers to the FSCS are starting to look more than embarrasing in respect of bank complaints. This will be construed as a failure of regulation.Previously banks were seen as capable of meeting their customers claims for compensation-so called cheque book regulation -but not since the credit crunch.Now they are a serious threat to regulation particularly with the numbers involved with PPI. As the realisation prevention is better than cure, IFA’s might just start to receive the recognition for their diligence in dealing with client affairs.I live in hope!!

  28. To Sam Jones: a common way of selling ASU on loans within banks was to just add it in and say to the customer “you’ll need this.” Non financially aware customers trust the banks and took the cover without knowing the choices. I took a loan out myself years ago and couldn’t believe the way they tried to slip it in. A client of mine is a copper & didn’t know he’d been paying for redundancy cover when front line can’t be made redundant. The bank returned 3 yrs premiums after we called them. Banks deserve to be clobbered for their greed

  29. I have a client who has just retired from her job at Lloyds bank after 35 years service. Referred to me by one of this individual’s family members, advice was required in relation to pension and investments. I asked this person why they didn’t ask for advice from Lloyds and they said ‘are you kidding – I want proper advice!’. This individual said that if PPI wasn’t sold they had to explain why, and also said that the next big issue of mis-selling was going to be ‘AVAs’ which are ‘added value accounts’ whereby you pay a monthly fee in return for a number of services you may never use. Again, there are incentives to flog these ‘AVAs’. Just where on earth is the justification in the Financally Shambolic Authority bashisg IFAs to death when it is quite clear to every sane person that it is the banks who are responsible for the large majority of mis-selling and the FSA themselves were allegedly oversseing the recent banking debacle. It’s way overdue that the banks are looked at, and very closely one would hope!!!

  30. Insight? From the FSA? Surely not……..

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