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MM Leader: Which? commission should be catalyst to major banks probe

Which?’s future of banking commission continues to expose sales practises the banks would rather the general public remained unaware of.

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.


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. Can the RDR as is proposed solve any of the problems the FSA perceives yet fails to identify with clarity? Will it in fact make the above situation worse? Is it not the case that the vast majority of bank ‘customers’ are unlikely to complain whether they are personal or business customers because they will be in fear of losing any ‘facility’ they may have? IFAs included.

  2. Why not let the banks embrace RDR as well and charge a fee for advice rather than receive commission.

    Either that or they can only sell products through IFA’s

    Im so sick of the banks not playing the game only the other day a colleague of mine had to tell a customer under so called TCF that he couldnt afford a mortgage he wanted. Though the same guy walked into the Woolwich with no detailed breakdown of his income and outgoings discussed and got the same deal we’d advised against.

    When are the FSA going to fine some individuals at banks for poor practise rather than the banks issuing some statement like ‘its a training issue thats being addressed’

    All too easy to prey on the little guys when the FOS proves beyond doubt that IFA’s in the main are conducting themselves they way they should be and the banks are after all they can get.

    RDR wont change the number of people going to banks for ‘ Advice’ it will increase the number as they see it as FREE advice. They dont realise there sold too until its too late

  3. Michael Fallas 4th March 2010 at 6:26 pm

    Don’t expect too much from this. The FSA are clearly allowing the Banks much more freedom that anyone else as they want them to survive and probably feel obliged to help them as much as they can.

    Justice for Bankers is not the same as for everyone ese. Remember the FSA has had to borrow money from the bankers and quite a few of them are ex. bankers.

    The sales targets and pressure on staff at the banks is very high indeed but I am sure the FSA have known this for years.

    Regulation of everyday financial products is the only way to go in my view.

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