Advisers may say there is nothing new in much of the evidence that has been presented to the first two evidence sessions of Which?’s commission but that is missing the point of the hearings.
Despite bankers being public enemy number one in the eyes of many due to their role in the economic crisis, not enough publicity has been given to the dubious sales practises employed by the banks when offering “advice” to customers.
We hope the commission will play a vital role in educating the public about the service they are offered by banks and lead to regulatory moves
to protect consumers. Probably the biggest criticism advisers give of Hector Sants’ tenure as FSA chief executive is his failure to crack down on banks. Most advisers have first hand evidence of the damaging effect of “advice” given by the banks as they are often left to clear up the mess.
All too often, the priority for the bank adviser is to flog the latest product to meet sales targets rather than offer products that meet the needs of the customer and their family.
Banks may say improvements have been made, yet complaints keep flooding in. Last summer, the Financial Ombudsman Service expressed specific concern about investment advice given by bank staff. It warned that customers, often elderly, were ending up with products they did not understand that were outside their risk appetite. The latest FOS complaints statistics, published last week, show a big rise in complaints against the big banks.
So, what needs to change? The FSA would point to the retail distribution review as a driver to improve bank advice standards although question
marks remain about its implementation. As it currently stands, banks will have to train their advisers to QCF level 4 and a greater transparency around charges is promised. While some banks say they are embracing RDR, there is furious lobbying going on behind the scenes to lower the professional requirements of their advisers.
Speaking at last week’s Which? evidence session, Bank of England governor Mervyn King said the regulator could learn from other industries
and suggested laying down a clear set of simple rules. We hope Which?’s commission will be the catalyst to finally giving bank advice the
regulatory scrutiny it deserves.