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FSA mystery shop reveals unsuitable bank advice

FSA Front 480

The FSA has announced it has carried out a mystery shopping exercise into the quality of investment advice of six major banks and building societies.

As a result of the review, one firm has been referred to enforcement.

The regulator says in response to the review firms have agreed to take immediate action including retraining advisers, making substantial changes to their advice processes and controls for new business, and undertaking past business reviews to identify historic poor advice and put this right for customers.

Firms have also been required to employ an independent third party to either carry out or oversee this work.

The mystery shopping review, carried out between March and September, focused on the quality of advice given to consumers looking to invest a lump sum. Out of a total of 231 mystery shops, the FSA says in 11 per cent of cases the evidence suggests the adviser gave unsuitable advice, and in 15 per cent 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, and the length of time the investment was held for was not suitable for the customer in 6 per cent of mystery shops.

Bank and building society advisers also failed to take into account customers’ financial circumstances and needs in 13 per cent of mystery shops. The FSA cites an example of advisers failing to recommend the repayment of unsecured debts where this would have been right for the customer.

FSA director of supervision Clive Adamson says: “This review shows customers are not consistently getting the quality of advice on their investments they should expect when visiting an adviser in a bank or building society.

“Whilst we are disappointed by the results of this review, we are encouraged by the action the firms involved have taken to rectify the situation for their customers. Since this review took place, we have introduced new rules on investment advice which have increased the professional standard of the advisers operating in the market and have removed the potential for advisers to recommend products that pay the largest commission but may not be right for the customer.”

The FSA has also published information for consumers to explain what to expect when getting investment advice and to help them check the advice they are getting is suitable.

In December Money Marketing revealed Santander had suspended its investment advice service and pulled 800 advisers off the road with immediate effect because they were not fully trained to meet RDR standards. All 800 advisers have been summoned to a crunch meeting in Birmingham today.

The FSA is investigating Lloyds Banking Group following the regulator’s separate review in September into how sales incentives drive misselling.

Last month Money Marketing revealed how much banks are charging for their restricted investment advice services.

A spokesman for the British Bankers’ Association says: “We welcome this review which shows the majority of clients received good advice from their banks, but clearly more can be done. 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.

“This exercise took place last year before the industry implemented new FSA rules which mean advisers are now better trained and are not paid commission for making sales. We would therefore expect the next FSA mystery shopping review to show real improvements.”


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There are 32 comments at the moment, we would love to hear your opinion too.

  1. Roman Duzinkewycz 13th February 2013 at 9:13 am

    Are we surprised?

  2. You dont say – wow! Even after employing all those ex regulators! Wicked innit

  3. Are we meant to be surprised by this article?????

  4. Well I’m stunned.

    I hope the L&G advisers at Nationwide had a visit as part of this!

  5. Would you beleive it!
    Banks not giving honest financial advice -No!
    Not collecting enough information-no !
    Selling flavour of the month -no!

  6. This is good news. It means the standard of advice from the Banks has improved dramatically in the past year or so.

  7. Banks unsuitable advice in mystery shop shock.!


  8. Have the FSA considered the adviser they mystery shopped might just have been given his/her redundancy notice and couldn’t give a monkeys? Seriously, did they need a mystery shop to discover the quality of banks advice? Where have these muppets been the last 10 years?

  9. It has taken those so called professionals at the FSA up to now to realise that banks were not here to look after clients but to sell rubbish productts for the highest commission. Now that RDR is here and IFA’s are refusing to take on low wealth individuals as clients who cannot afford their fees then the banks will still be the only place for the majority to go to. Well done FSA low wealth will still get ripped off

  10. Of course, IFAs have never given unsuitable advice. KeyData anyone?

  11. When the FSA or FCA have got rid of all but big IFA firms that all Joe public will have to deal with.

    Oops i forgot Ma!!!

  12. So will re-training work? I suspect that one of these misselling banks was Santander, otherwise why did they withold this press release until today, when all their very restricted advisers are in a big meeting in Birmingham? I suspect another bank deciding, in this moralistic age, that they will cease to give financial advice, then sell their client bank or even the whole operation, to a consolidator.. Although I don’t approve of their products or sales methods, I feel sorry for their advisers, who, like clockwork toys, have been wound up and marched to Santander’s tune, and are now facing a worrying day.

  13. Are we surprised no!

    What is really surprising is the FSA is still not taking action against the cultures of these banks as many financial advisers working in these organisations feel under pressure to sell unsuitable products and have unrealistic targets to hit.

    How on earth can you conduct a proper financial assessment of somebody situation when you’re expected to have 15 booked appointments in your diary each week. It is unrealistic for an adviser to have this level of activity and still be able to process all of the paperwork particularly with little or no admin support. As well as carrying out a mystery shops the FSA should be interrogating the actual sales process of these organisations, particularly when these organisations are reducing staff numbers and putting pressure on remaining staff to produce ever higher levels of performance.

    If an organisation is referred to enforcement then I hope that the FSA will be brave enough to revoke that organisations license to give advice until it restructures its business to take away the pressure from advisers.

    Another good starting point would be to pay advisers a decent salary rather than those advisers needing to generate bonuses to give a liveable wage. The bonus culture within banks and the incentives are all designed to create a culture of greed and not a culture of good customer service. The average adviser salary within a bank or building society is only £27,000 and top producing advisers (note that I did not say top quality adviser) can earn four times that in bonuses, you have to ask yourself what they have to do to earn a bonus and surely that’s a question the FSA should be asking.

    Personally I would ban banks from giving any type of financial advice and make them into product providers only but I am biased as I am an IFA and have a vested interest.

    My last point, is what on earth has our regulator been doing for the are you are you in 12 years, it does beggared belief.

  14. When it comes to investing lump sums i’m sure that customers are not fully aware what it means to do this through a bank. My experience is that customers know they can shop around for life cover/insurance etc but tend to stick with their bank when it comes to lump sum investment advice.
    Banks probably shouldn’t be able to provide lump sum investment advice as their record of mis-selling complicated products is terrible.
    Fortunately the FSA’s introduction of RDR has resulted in the banks deciding not to offer lump sum advice at branch level (unless you are a wealth eligible client) without the FSA having to ban it. Unfortunately this will not result in more clients looking elsewhere for advice and finding IFA’s it will result in clients not getting any advice at all.

    My challenge to the FSA would be that all the money wasted on things like mystery shopping the big banks (we already know the culture is rotten) and Money Advice Service would be better spent on a nationwide advertising campaign extolling the benefits of getting advice and pointing people in the direction of IFA’s.
    Just my humble opinion though.

  15. Nick Wardle | 13 Feb 2013 10:26 am

    Spot on !!

  16. No kidding!

    “The mystery shopping review, carried out between March and September” So what took so long to establish the results?

  17. Whilst it doesn’t come as a surprise, it’s a little sad to see that when the FSA does something about it, they are still criticised.

    I realise that it’s easy to knock the FSA but here they have done something which, whilst the findings were expected, appears to have had a specific outcome which may (or may not!) improve the client outcome.

    I continue to say that the FSA should tighten up on disclosure and ensure that clients are aware where their ‘advisers’ essentially can only sell a very limited range of products.

    I’ve also posted previously that the conflict of interest policy of Banks must be questionable where advisers have product specific sales targets. Advice is rarely black and white and therefore if this months sales target is ISAs, you may well find that they can be made very appealing for someone who is perhaps looking at retirement planning where a pension might also be suitable.

    If I was a client seeking advice, I’d simply ask the adviser to demonstrate how they align the clients best interest to their own and also ask them to outline whether they feel there is any conflict of interest between them and the client and if not, how can they demonstrate it.

  18. I think there is still some evidence that there are advisers in the bancassurance market who are doing the right thing for their clients. That said, even 1 unsatisfactory result is 1 too many. However, it makes me laugh when I see some IFAs sprouting a ‘Holier Than Thou’ attitude when we can all probably come up with some pretty poor examples of advice given in the past by some IFAs which would undoubtedly fail closer scrutiny. Perhaps they should be mystery shopped next.

  19. I make no bones about being cynical but questions should be raised, as to how much Sants diverted interest into the banking practices to save his buddies embarrassment or indeed land himself a very well paid position ? dont forget he tried to leave the FSA early !! he obviously knew this pile of poo would raise to the top ?
    His time in office (it seems) was to put IFA’s thorugh the mill leaving the banks unchecked to reek havoc, now he has left, we are only beginning to see the true extent of the problems they have produced !! and yes I did watch the BBC 1 program on Barclays earlier this week

  20. Not all IFAs are refusing to to take on so called low wealth clients and my fees for small investments are not exorbitant or even off putting.

    I will set up a £100 a month investment savings ISA for £100 upfront and 3.00% a month and would happily see 4 clients a day to do just that – if only I had people on the front counter herding them into my office!

    I totally disagree with segmentation and silly fees – I am independent after all and will do what I have always done for what I think it is worth.

    If other IFAs want to try and charge over the odds with high hourly rates that is there choice.

  21. Having worked for Santander, Nat West and others this is no surprise whatsoever. Bet they all got their targets though, and their bonusesand their colleagues that tried to give proper advice were managed out.

  22. Anonymous | 13 Feb 2013 12:19 pm

    You’re spot on. I’ve seen kids in one of the so called big banks nearly terrorised because they couldn’t hit their targets. In those days the bank staff had to make appointments for them and the poor guys in question tried covering the 4 low income branches they had been given and half the time the appointment wasn’t kept. Was it any wonder they tried any which way to make a sale however they could when they finally saw someone? There jobs depended on it.
    The culture in our banks has always been profit first, customer last and god forbid any adviser who couldn’t sell their quota. Worst working experience in my life.

  23. 25% of the advice unsuitable??? 100% of Keydata advice unsuitable, 50% of UBS advice over AIG fund unsuitable.

    If anyone really wanted to they would find all advice given by anyone unsuitable. Except “Ma” of course – hang on they are not giving advice.

    It is advice and if the person receiving it does not understand, agree, appreciate, trust or value it then they should not do it.

    Degree’s in Hindsight are lovely aren’t they.

  24. Well Well, hope they have been looking closely at what is going on in Nationwide now ex bank assuer managers are acting as sales directors across their network. Looks like another scandal about to break.

  25. Rev Norfolk N Chance 14th February 2013 at 9:23 am

    The saddest part about all this is that the rejected/redundant bancassurance advisers will no doubt end up being added to the role-call of certain large IFA organisations … peddling the same tat in order to hit target/achieve bonuses!!!

    ‘Plus ca change’, as they say down in Barnsley.

    There will always be – and have been – bad advisers (on BOTH sides of the fence), just as there are bad Accountants/Solicitors, it’s just a “greed-culture” (esp at banks) seems to recruit more of the numpties that the/an industry needs rid of …

    Agree that ALL IFAs shoud have a ‘decent’ basic salary, no target related pressure and bonuses based on service quality/complaints levels/any pro-bono work done/qualification levels/mentoring quality/any technical bulletins, items or training provided to others/etc etc.

    Or, is that too idealistic??

  26. The real winners under RDR are the non-advice, fixed fee services like Cavendish Online. They already benefit from priceless free advertising and endorsement on websites like MoneySavingExpert (although I suspect Martin Lewis is getting some sort of kick back!). It is likely that the low wealth customers who are being shunned by the banks and some IFAs will simply make the ISA choice themselves and buy using these companies. Personally, I can’t see how paying for advice from an IFA when investing say £10,000 or £100 per month in an ISA will give me any sort of advantage, given that investment performance is not guaranteed whether I take advice or don’t take advice!

  27. I hope the FSA interrogate the management at these institutions and the pressure that they exert on their advisers. I have never worked for a bank, but I’ve always heard about heavy handed pressure on their front line staff. Some of the bank advisers live in fear of losing their jobs – how can that encourage ethical behaviour?

  28. RegulatorSaurusRex 14th February 2013 at 4:57 pm

    Where is the mystery?

  29. I have worked for a bank and been an IFA for 25 years.

    There are idiots in both camps but the pressure on bank staff to ‘perform’ is absolutely criminal, it is unfortunate that unlike directly authorised IFAs the bank staff pay no price for being wrong other than a P45 in hand and a lot of them became IFAs with some firms actually courting them!!

  30. so does anyone know what happened to the santander staff?

  31. Liz @ 10:35am

    They are selling bank accounts and no i am not joking.

    They have to wait and see what Santander decides to do.

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