Will 2011 be seen as the year that the FSA finally began to crack down on poor bank advice or will high-street institutions carry on as before, accepting the odd slap on the wrist as a price worth paying?
This week HSBC received the biggestever retail fine from the FSA, £10.5m, in relation to failings of its care fees arm Nursing Homes Fee Agency, which it closed down earlier this year.
This follows a £6.3m fine for RBS-owned Coutts for inappropriate advice on AIG premier bonds, a fine of nearly £6m to Credit Suisse for its private banking arm misselling structured products, £3.5m against Bank of Scotland for mishandling investment complaints and a £7.7m fine against Barclays for misselling two Aviva funds to customers. Building society Norwich & Peterborough was also fined £1.4m for inappropriate Keydata sales.
On each occasion, the offending institution has been ordered to conduct a past business review and make good any client losses.
However, none of these actions has led to any senior management facing personal fines or bans.
It is difficult to see how the standards of bank advice will really change without making the senior management personally accountable for the type of culture they allow to develop below them.
Since Money Marketing’s investigation last month into single-tied arrangements between networks and providers, a number of providers have spoken of their concerns over possible consumer detriment in this area.
The regulator’s new remuneration rules must be effectively enforced for independent and restricted advisers and in particular for single-tied arrangements.
Big distributors may well be feeling the pinch but propping themselves up with unsustainable deals brokered primarily to benefit the distributor rather than consumer is no way to build a future.
In its guidance consultation on distributor-influenced funds, published this week, the FSA questioned what advice tied or restricted advisers who only recommend Difs will provide if the Dif is not a suitable product. This questioning must apply to all restricted arrangements, regardless of product.
If the product or range is not suitable the customer should be sent elsewhere. The FSA may well have a tough job policing these arrangements but it is a job they must get right.