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Will the FSA clamp down on bank advice?

Evidence of inappropriate investment advice being doled out by the banks is increasingly emerging from consumers, IFAs, trade bodies and now the Financial Ombudsman Service.

So what is it going to take to make the FSA do something to stop banks flogging unsuitable products, particularly to elderly consumers?

In Money Marketing this week, the Association of Independent Financial Advisers is calling for an FSA investigation into bank advice after FOS identified an increase in unsuitable investment advice being given to the elderly.

A FOS spokeswoman says: “We are seeing an increase in complaints from older consumers where they have been advised by a bank, rather than an independent financial adviser.

“Many of these consumers had only gone into the bank branch to make a withdrawal from a savings or deposit account but ended up being advised to take out an investment.

“It is particularly concerning that even when a consumer had explicitly referred to the fact that their main priority was to protect their capital rather than generate a return, they were still advised to invest in funds that put their capital at risk.”

But the FSA will not commit to a specific review of banks’ advice practices, despite the FOS’s fears. It says it will continue to handle the FOS’s concerns under its regular supervisory process.

Association of Independent Financial Advisers director general Chris Cummings says that is no longer sufficient. He says the FSA has to take a close look at bank advice and protect vulnerable consumers.

In April, Money Marketing revealed adviser concerns about advice given by Barclays’ advisers to elderly investors to invest large sums in Aviva’s global balanced income fund. It is understood there are now over 200 complaints that have been referred to the FOS over Barclays’ advice.

Do you support Aifa’s calls for a review of banks’ investment advice procedures?

What can the FSA, trade bodies, IFAs or other groups do to ensure consumers, and particularly the elderly, are aware of the independent advice option?

Post your comments below.


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There are 29 comments at the moment, we would love to hear your opinion too.

  1. Elizabeth Young 19th August 2009 at 4:46 pm

    what to do
    send a copy of this article to your MP. If they are honest (some are) and care about their constituents (some do). They will raise the matter at Westminster.

  2. Bank Advice
    I know they telephone elderly customers to come in for a meeting saying they have “too much money in your current account”. One bank I know sold a credit card (!) to a 71 year old who already barely uses their debit card. It’s just to hit targets, nothing to do with suitable advice.

  3. Are banks subject to TCF?
    If banks are subject to TCF, why don’t the FSA ask for copies of training manuals and review the banks criteria for risk assesment

  4. FSA clampdown? No!
    Am I being a bit cynical here or what? Let me see now…Banks can employ mega-buck QC’s to fight their corner until the FSA personnel retire on their mega-bonuses. If the FSA do slap the banks with a fine it is probably miniscule compared with the profit the bank will have made on it’s transgressions. In the meantime, the personnel at the bank who instigated the transgression have probably received their mega-buck bonuses and retired to their private island! Oh and by the way…Who is going to offer the top people from the FSA a non-exec directorship when they retire from the FSA? The banks of course! So are the FSA going to bite the hand that will feed them in the future? I doubt it. Much better to concentrate on the small IFA as they cannot fight back!

  5. usual FSA
    same old story from the FSA, They spend far too much time and money regulating the independents out there who are trying to earn a living and provide good honest advice to thier clients, many of whom have become friends. Insted of looking at the banks and the appalliing tactics that they use to trick customers into products and services they do not want or need. I have personally seen the bullly boy tactics used in banks on elderly clients and feel its a disgrace that banks still get away with it.

  6. Unsuitable advice from banks
    Whatever next? Will the FOS be telling us the the Pope is Catholic or commenting on bears’ lavatorial habits in wooded areas? I think we all know of instances such as those described in your article and the FSA seem reluctant to do anything about it. What is particularly galling is that the perpetrators of this kind of activity are in many cases being rewarded with taxpayers’ money.

  7. Clamping down on banks
    We have seen for the last 5 years numerous cases like the FOS cases. The bulk of complaints are generated from the banking sector. It makes you wonder what the banks and building societies have to do to make the FSA sit up and take note.

    I interviewed a client this week who is cautious on every level. A building society adviser has stuck him into a unit trust portfolio with 75% + equities only two month ago. I have read the advisers report and it clearly states the clients attitude as cautious but then goes on to ignore it in the recommendation. Luckily the markets have risen (for now!) This kind of poor advice affects us all in financial services, not just the banks.

    It is generally accepted that banks will be the unltimate beneficiarries of RDR, many believe RDR was written by former bankers for existing bankers to benefit future bankers. So why the surprise when the FSA is seen not to regulate banks! Ernst & Young say: “Given the changing dynamics we foresee a reduction to approximately 10,000 IFAs by 2013, the majority of this reduction happening towards the end of 2012 but there will be casualties in the shorter term too.” NB: No account is taken in these figures of the support staff fall out! If you estimate that each IFA firm as a minimum of two support staff then the unemployement consequences are closer to 30,000 people.


  9. Will The FSA Clamp Down On Bank Advice
    The FSA have demonstrated (if there was any lingering doubt) that they are not fit for purpose. Their primary function is to protect the consumer, and they have failed to do this over a sustained period. Bank advisers write a small minority of retail business, yet generate the vast majority of complaints in the same way that closed insurers control the minority of funds yet generate the majority of complaints. It does not take a rocket scientist to work out that you must first address these isues before you can address any issues covered under RDR. The Conservatives promise to disband the FSA should see a near 100% Tory vote from the IFA community. The problem of being regulated by an incompetent regulator with warped priorities is the risk of reprisal if you raise your head above the parapet. In many ways being an IFA in the UK is like being a White farmer in Zimbabwe.

  10. FSA and Banks
    Coincidental or inevitable? This very afternoon I have had a widowed 65 year old lady calling at the office with what appears to be a 10 year term assurance sold to her for IHT purposes and, in deference to her cautious approach to investment, a 3 year bond where the return is determined by the FTSE 100 performance.
    The same bank last year sold another widow aged 65, with a healthy income from her late husband’s pension as well as her own monies (and a state pension in her own right), a £300 per month pension policy on the grounds she had a part time job in a local library.
    Will the FSA clamp down on Bank advisers? You bet, just as soon as this pink little porcine creature has finished flyoing past the window…..

  11. Vested Interests
    Banks have and will continue to drive a coach and horses through any regulation. They have far too much muscle and are into bed with the FSA. It is a simple as that.

  12. Will the FSA clamp down on bank advice?
    No it will not. The FSA never has and it never will, because they’re all cosy buddy members of the same club. If things start getting uncomfortable for the banks, a few strings get pulled at high level behind closed doors in the corridors of power and the FSA starts instead to make a noise about the RDR or some other distraction. Why does the FSA have nothing to say on these accusations of persistent and brazen regulatory bias? No one available for comment, as usual? They’re probably all out on another of their 3 hour expense account lunches down at the pub or at some expensive restaurant in Knightsbrige. I could recount the story of a new client I’ve just seen this very afternoon in the wake of investment “advice” given to him by his bank (£5,250 commission for putting the entire sum into a single 5 year Investment Bond), but it wouldn’t be much different from thousands of other such stories happening every day of the week. And what does the FSA do about it? Look the other way and try to get the rest of us to do the same. The stench is almost suffocating.

  13. What a hope in hell!
    Why won’t the FSA just come clean, admit that it is politically convenient for them to completely ignore this malpractice as if it just wasn’t happening – many of us sense the hand of Government in all this….it wouldn’t do to upset the cosy Government / Banks relationship. And whilst laughing up their sleeves, even at the expense of elderly from whom they derive, withot remorse, their ill-gotten gains and absolutely no morals at all, so their CEOs can still sit at expensive lunches with ministers; the banks collectively show us exactly what the situation is by declaring, by dint of their actions, ‘Tough luck FSA, we’re too big and powerful for you to take us on anyway…’…. Rotten to the core….if we IFAs behaved this way, being the small easy targets that we are, we’d be hounded to kingdom come…simply unbelievable

  14. FSA as a regulator
    Regardless of all your comments about the banks. It is the FSA as a regulator that is the main concern, all we hear about is how they fine and strike off brokers. I think it is a disgrace that they do not do the same to the banks. And moreover, no complaints about it from the AMI /AIFA or consumer groups or even MPs. WHAT IS GOING ON???

  15. Money talks..
    The banks need to make lots of money or the taxpayer will be picking up the next tab which may come along sooner rather than later. The ‘customers’ are the banks’ only source of instant financial fix and whether the unfortunate victims be investors or borrowers they will be milked dry in order to balance the books. Then you have the problem of lobbying, the banks have oodles of money while IFA representative bodies do not, even if they do they are of little use in the scheme of things. It therefore follows folks that you either put up or shut up. Ranting on blogs won’t work, shouting and screaming down the telephone at the politicians who may make up the next government certainly won’t help. We, sorry you, are all facing a difficult future, regulators and regulated alike, and unless we can offer something better than what is planned… the end is nigh for many of you.

  16. Bank MIS-SELLING
    Do not forget Building Societies who have been up to the same game. Most elderly people who were persuaded to transfer deposit cash over to investment bonds, have probably lost at least 30% of their savings. Some of these poor people who have come to me for advice, AFTER THE EVENT, were sold a bond on the basis that they required additional income- They were not aware of this until I pointed this out to them in the so called suitability letter, nor were they aware of the huge 7% commission taken. There is an awful lot of them out there. I believe it is an IFA’s duty to report such cases, but how many do for fear of involvement with the FSA. i COULD GIVE THEM AT LEAST A DOZEN CASES.

  17. I was a Bank Bond Flogger
    Well at least they thought I should be, and my departure was hastened by my reluctance to sell IHT Bonds when Will Trusts would have been more appropriate.

    Part of the problem is that Banks describe some Term Deposit Accounts as Bonds, so when they punt another “Bond” innocent savers do not fully realise what they are being flogged.

    Opening lines will be ” Interest on your account is very low at the moment, would you like to discuss ways of getting a bit more ? ”

    IHT gets stuffed in as a reason to support selling a non income producing insurance bond within a trust rather than term deposits and cash ISAs that many risk adverse clients should have.

    And of course it all comes down to “If you want to stay employed flog XX amount before the month end.”

  18. FSA – regulator – SELECTIVELY ONLY!
    Further to my previous comments at 18-32pm and the subsequent reader’s comments…yes he’s right, the regulator is at fault massively – that doesn’t excuse the taking what is the life savings of some elderly folk and putting it just any old where for the huge commission it brings. That would be like saying that, just because you have a poor referee, who doesn’t notice the obvious things going on around him, you can slug your nearest opponent in the head without penalty…NO, it isn’t good enough to say that you can foul your way through a match just because the referee can’t see further than the end of his nose…that simply doesn’t make it OK to cheat….. Nearer the mark is the fact that ‘pretend’ tough guy Sants and his cronies feed at the same trough as the rest of ’em…bankers and ministers alike……no wonder other European leaders and others round the world hold Brown and the UK in such distain, when they see what is going on in this country…other countries regulate fairly and keep banks in check whilst seeing huge value in professional advisers such as we IFAs, as being beneficial to their public…no wonder retirement and pensions are so far in advance of ours elsewhere………

  19. Will FSA clamp down on bank advice
    Never. The FSA is in awe of the banks. The banks tell the government how things are. The whole rotten world of banking is linked to the whole rotten world of politics – fraud, corruption, self-interest and incompetence pervades, The FSA is only interested in empire building and feathering its own nest. The IFA tries to offer solid advice, decent products and an honest level of service – despite the FSA, Gordon Brown and a regulatory system that continues to fail ordinary people.

    It has been obvious to many IFA’S and Brokers for years that the FSA have an agenda to reduce or even remove all small IFA’S and Brokers in favour of Banks and larger institutions, in spite of most incidents of misselling coming from bancassuras and direct sales forces, so they will find excuses to do nothing-as usual. I actually wrote to Howard Davies when he was in charge, but of course he denied there was any hidden agenda.

  21. Banks
    Only this evenning I bumped into a client who had to got to his bank today (Lloyds). The first thing the cashier said was “you have a lot on deposit, we can get you better a interest rate” then she commented on his direct debits “with the statement” you seem to paying a large direct debit, who is that too.” when told she commented that “that seems a lot to be paying. When he said he would talk to his adviser she changed trackj and sold him a credit card instead. This is becomming a joke

  22. The Banks
    The investments scandals are only following previous bad advice. I saw clients a while ago who bought a shop and borrowed £100K secured on the property. The bank where they had been for 15years previously said that they wouldn’t lend unless they took out the single premium payment protection plan, which cost the clients £24,000 bolted onto the mortgage.! This put the clients in more debt and they were being charged 7.5% interest PA on the extra and paying £237 a month on top of normal mortgage payments to pay the cost of the protection plan. Absolute disgrace to put a start up business through this, and one of the worst cases of financial advice I have ever seen. Needless to say after a fight and a complaint to the FSO after 3 years the bank was ordered to pay back every single penny to the clients plus interest. FSA have NEVER named and shamed the main perpertrators who they fined and disciplined… WHY?!!!!…they name IFAs who get fined and banned?….In the end FSO banned single premium protection plans because they couldn’t cope with the level of complaints.

  23. Banks and the FSA
    The FSA has long turned a blind eye to some quite appalling advice practices within the banking sector, whilst continuing to hound and harass the IFA sector which is proven to give better advice to its’ customers.

    This latest revelation will quickly be forgotten or swept under the carpet. Those that need the protection that the FSA is supposed to provide will continue to fall prey to banks who are wholly and solely focused on profits.

    The FSA should re-examine their statutory objectives. The question is: are they meeting them?

    the relevant three are:

    market confidence: maintaining confidence in the financial system;
    public awareness: promoting public understanding of the financial system;
    consumer protection: securing the appropriate degree of protection for consumers

    I think I know the answer – do they?

  24. Bank advice
    What will the FSA do?


    as usual.

  25. Regulate banks? Heaven forfend!
    The FSA trots out that it will address the concerns of the FOS under it’s ‘regular supervisory process’.
    Would that be the process that has singularly failed to have any impact for the last ten years? The process that is supposed to operate across the board and be proportionate to the risks involved? Or is it the process that other contributors have, correctly, identified as the FSA being the protector of the banks and the non accountable arm of the Govt./Treasury?
    Unfortunately the tripartite system foisted upon us has no clear line of responsibility and nowhere is this more apparent than with the FSA where there is a conflict of interests at the core. On the one hand the FSA is there to regulate the Markets and the Financial Institutions that use and make up those markets and on the other it is there to protect clients/customers/consumers. These two objectives are incompatible.
    The standard Civil Service and bureaucratic response is therefore that the FSA will let it’s ‘regular supervisory process’ take its course!
    Despite the fact that when a number of banks failed the FSA’s response was that their ‘processes and systems’ were just not effectively and, they were forced to accept, not up to the job. Ergo, nobody was to blame because nobody was at fault, it was just ‘the system’! Eventually an apology was grudgingly made but only because the FSA wanted to move on from the debacle, not because they had any intention of cleaning out the stables.
    This is the same again. The FSA still believe they have a ‘system’ in place when all outside the FSA can see clearly that they do not, at least not one that the FSA is prepared to operate properly and that is sufficient for the job.
    Funny how these things are so often to do with Bank regulation though. The Bankers must be laughing all the way to the …… estate, holiday isle etc.

  26. Alan Summerfield 20th August 2009 at 10:53 am

    FSA and bank advice
    Once again, the FSA has shown itself to be completely toothless, not to say lacking in moral fibre, in monitoring and regulating the Banks. They are content to micro-regulate small advisers such as myself, while letting the banks get away with whatever they want to do (witness single-premium PPI, the bonus culture, toxic debts, etc etc). If this isn’t fiddling while Rome burns, I should like to know what is.

  27. Banks and the FSA
    When the upper tier of the FSA and the banks are mutually exchangeable what do you expect? And now we have the FSA borrowing £200M. I suspect that will enable a lot of files that should be looked at to remain closed. A financial banana republic is what we now exist in.

  28. Will the FSA clamp down on bank advice?
    For the past two years consumers have voted with their feet and no longer regard their bank as their main source of financial advice, with growing numbers prefering to do their own financial research online. The elderly are one group who still remain more loyal to their banks although the current negative publicity is likely to reduce even further the banks role in financial advice.

  29. Will the FSA clamp down on bank advice?
    AIFA criticising banks may not be made from an impartial view point.

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