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‘You don’t pay me a penny for this advice’: What bank advisers told clients

FSA Letters 480

The FSA’s mystery shopping exercise into the quality of investment advice at banks and building societies revealed staff claimed customers “don’t pay a penny” for advice and will “always get a return” from their investments.

In its report on the mystery shopping exercise, published yesterday, the FSA says it has concerns that advisers in some banks and building societies “continue to make a number of basic financial planning errors”.

Here are some examples of the poor investment advice uncovered by the FSA mystery shops:

“You don’t pay me a penny [and] you don’t pay the bank a penny for this advice.”

One adviser incorrectly stated the customer would “always get a return”, and told him the potential return from the product was three and a half times more than the maximum achievable return.

An investment sales aid, used to compare potential investment returns with returns on cash deposits, suggested a positive return at the end of the term. The adviser told the customer this was “the lowest possible return” he could get and represented the “worst case scenario”, which was not the case.

The adviser told the customer: “If I only put a five year timescale in, because you have no experience in the stock market, [the system] will probably drop you to cautious [risk]. If you want the better growth potential of a balanced [investment] we may need to put in a longer investment term, but after three years you can get it out.” The adviser set up the investment on a 20-year term.

From 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.

Money Marketing understands Santander has been referred to the FSA’s enforcement team following the review.

Recent FSA enforcement action against poor investment advice:

February 2013: UBS fined £9.5m over failures in the sale of the AIG Enhanced Variable Rate Fund

February 2012: Santander fined £1.5m for failing to clarify Financial Services Compensation Scheme cover on structured products

December 2011: HSBC fined £10.5m for inappropriate investment advice by its subsidiary Nursing Homes Fees Agency to elderly customers

November 2011: Coutts & Company fined £6.3m over failures in the sale of the AIG Enhanced Variable Rate Fund

April 2011: Norwich and Peterborough Building Society fined £1.4m for failures relating to the sale of Keydata products

January 2011: Barclays fined £7.7m for misselling the Aviva Global Balanced Income Fund and the Global Cautious Income Fund



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There are 41 comments at the moment, we would love to hear your opinion too.

  1. Nothing surprising here, pretty much the sort of advice we expected, one can only ask why it has taken so long for the regulator to attempt to check…. this is all about product selling.

  2. Those aren’t “basic financial planning errors” they’re bare-faced lies.

    To call them errors implies that the advisers simply made a few mistakes rather than deliberately misleading customers in order to make a sale.

  3. Shock horror!! The banks are mis-selling – when is the industry and the public going to wake up and smell the coffee!!!!

  4. I am concerned at the changes the RDR is making to the IFA sector in that the regulator seems to be under the impression that “advice” is unconnected to product purchases by consumers. What is the point of providing and advisory only service without a channel to purchase a suitable product. The banks should hang their head in shame at their antics, but we all need to recognise that there is always a sales process connected to financial advice, we sell ourselves, our knowledge and expertise and our ethical conduct in order for clients to want to consult us, but we still need to “sell” the benefits of a particular course of action and product purchase.

    Re – Life Assurance – without a life policy there is no protection so advice must be to recommend a suitable product.

    Re – Planning for income in retirement – although there are cash ISAs, Stocks and Shares ISAs the most tax efficient and beneficial method of saving for retirement income has been and probably always will be pension plans due to the tax incentives – what self respecting adviser would not enable a client to take advantage of a 20% (or higher) relief on contributions.

    Re – Investments – retail investment products which invest in multi assets are products which are purchased under advice, but they are of no use if the benefits are not sold

    Everything has to be “sold” no one ever purchased a product of any description whether it be a car or a life / pension plan without a sales process nothing ever gets bought. That is why we have conduct of business rules (COBs)

    Selling is not anathamy to the advice process, it is the vehicle by which the client is informed of the benefits and of course any potential downsides to a product purchase, but everything needs to be sold.

    I don’t recall however being “sold” on the benefits of regulation of which there seems to be few to the stakeholders who fund these people, who have to date let us all down with their failings.

  5. Terence P. O'Halloran 14th February 2013 at 10:28 am

    And what prt of the English language does this offend?
    This is the old ‘Which?’ – ‘Consumer Association ‘ technique for creating headlines to ‘shock’ the public.
    From a sample size of 231 eleven percent (11%) were in error. Eightynine percent (89%) were not.

    If the FSA could boast even half of that percentage success rate they might just have some street credibility.

    This is pure adverse propaganda endeavouring to justify the existance of a useless and unwarrented organisation. When will folk wake up to reality?

  6. Some of the examples are pretty damning in terms of the false information some Bank advisers were giving to clients but 11% of cases being identified as unsuitable is not actually as high I thought it might have been.

  7. Here we go again. The Mystery shoppers and FSA are wrong wrong wrong if they think that “advice” unconnected with arranging a product could not be free – how many of us have given advice which has been free under the old system – They need retraining if they persist in this myth and are misleading consumers. Commission may have been paid for arranging the product but not for the advice leading up to a possible product being sold – and are they claiming that quotations and disclosure of commissions was not made ? I have seen instances of pressure by bank staff but not failure to issue disclosure documents

  8. Im not sticking up for banks here and we all know where most of th bad advice has come from over the years, but what really annoys is when I come accross articles saying there is no such thing as free advice,there absolutly is. I charge 3% upfront plus a half ongoing for all investments. If i see a client I see them on a no obligation basis, I give them advice and if they were to say sorry I dont agree or I cant afford or any other reason under the sun they walk away and there is no charge!! Earth to Natalie Holt (the person who wrote this article), How is that anything other than FREE ADVICE ??? The client had the advice, chose not to do anything, has not received any bill ……..And yes, I’ve just checked the definition , its most definitely FREE !!!!

  9. Guy walks in to branch of Santander and spends an hour with adviser. Guy then leaves and doesn’t return.
    How much would the guy have paid for advice when this research was carried out?
    The report doesn’t tell us if the mystery shopper returned and took up the advice. If they did and the adviser was still advising that there was no fee for his work then, yes, that is incorrect. But, I bet the mystery shopper didn’t take up any advice and I bet they didn’t pay a penny for the advice whether it was good or bad.

  10. ‘You don’t pay me a penny for this advice’: What bank advisers told clients


    You can have as much advice as you want absolutley free from the banks.

  11. And they honestly did believe that the difference between an IFA and them was that IFA’s charged the client and they were free! I know a bank employee who used these exact words in a conversation in our local and I looked at him in utter disbelief. He believed totally that what he had said was true.

  12. And I know of IFAs who have used the exact same words. So rather than go to us and pay for advice by cheque, the client went to another local IFA. It is not only banks that use unfair tactics and that is why all IFAs (sorry clients) have been lumbered with the RDR.

  13. The guy was correct. They will always get a return. However, this might be less than they actually invested :), and of course the advice was totally free. No invoice was raised for that part of the equation so technically they were correct. The advice was free; the purchase of a product was not. How many products did the FSA actually purchase? If they purchased none what argument do they have against being told the advice was free? If they came to an IFA such as me they would be told the price at the outset and there would be no advice of any type until the fee agreement was completed.
    The FSA of course won’t want to do mystery shops with IFA’s post RDR as that will cost them.

  14. @ James 12.54pm

    I’m sure they will do mystery shops post RDR as it doesn’t cost them a penny – we pay for it!

  15. If the advice is GENUINELY free that I have no issue – but let’s be clear, clients often do not separate out the ‘advice’ and ‘product procurement’ and therefore I fear using that as a reason doesn’t reflect the actual situation.

    The example in the article appears to be where the work of the adviser was paid for by commission and therefore the cost was paid for through product charges.

    Therefore the involvement of the adviser led to a cost. Ok, if the adviser said ‘my advice is free but I’ll charge you for setting up the product’ then arguably the adviser is being accurate, but given the FSAs comments, it would appear that it was simply the case where the ‘cost of advice’ was being purported as being free yet commission was being paid as a result of the advice process.

    I sincerely don’t understand what people have to fear – the vast majority of people I meet have no issue with paying me for my advice once I have outlined what we offer, what our work involves, the benefit (or potential benefit) to them and the cost.

    In fact, by being so clear and transparent, I am then able to clearly justify how my interests align to their, how we have no conflict of interest, and the benefit of dealing with someone impartial and independent – all positives!

  16. This is a clear example of the adviser (I use the term loosely!) simply telling the client what they need to hear to buy the product, knowing full well that they’ll probably not be working at the bank when the doo-daa hits the fan in a few years and the client comes to cash in the investment. This has nothing to do with poor training, and is just an example of Arthur Daley selling practices! Are we really surprised? For years bank advisers/consultants (or whatever they call themselves) have been telling mortgage customers that the purchasing of life cover, home insurance and MPPI from the bank was ‘a condition of the mortgage’ and would effect the mortgage decision! Obviously the real reason was to secure the extra sales and commission. They’ve been getting away with that for years, and still do, so why should we be surprised that this is also happening with investments. Don’t get me wrong, the practice is not isolated to the banks, but over the last decade the focus of the FSA has clearly been on IFAs (particularly smaller IFAs), as these people were easier to investigate and easier to punish. Fortunately, a lot of the IFA deadwood has now been forced out of the industry. Now that the FSA is finally starting to do it’s job and look at the banks then the real truth is being revealed. Maybe we’ll see a lot of the deadwood in banks disappear?! In the meantime, why should we pat the FSA on the back for doing it’s job LATE!

  17. The banks could eliminate these sharp practices by simply recording every sales meeting/interview. An employee is far more likely to follow the sales process if they know it’s on record. Random assessments by supervisors or managers are pointless as the adviser will simply follow the rules when being assessed, and fall back into bad habits when they’re on their own.

  18. Bank advisers are fortunate in that they receive a basic salary to cover the time they spend talking to potential customers who subsequently decide against their advice. IFAs don’t have that luxury.

  19. Reading some of the responses above I can now see why our industry needed RDR as I’m staggered to see some claiming that they give advice for free! If you do then you are silly because you are effectively giving away your knowledge for nothing. Yes, in the past we got paid for implementing products and our remuneration came from those products but the advice was never free, it was just our remuneration was wrapped up in the product.

    Bank advisers and indeed independent financial advisers should have never claimed that the advice is free and I would like to see that actual phrase free advice – BANNED in all marketing material.

    Stop lying to yourselves and indeed clients, if you tell the clients the truth you will be surprised at how they are willing to pay. Of course products have to be sold as many concepts within financial services are not ones that people will willingly go out and purchase. The fact is we are professionals and we should be proud of that fact and we should get remunerated accordingly.

    Whether I charge a fixed fee, hourly rate, or a percentage of investment the fact is the client is paying me for advice. Until we recognise that fact and that fact alone our industry will not move on and the independent sector will not flourish like it should do.

    Some advisers seem to have a problem over disclosing fees and in the past when I worked for a Bank I observed a number of advisers struggling with the last page of illustrations where commission was disclosed. I’ve always found this pretty easy page to deal with myself, as I phrased it in the way that your remunerated yourself client and this part shows you how much our organisation will receive from the proceeds of this sale. Of course this is not received by me personally but it does go towards my salary and the running costs of the company. After 18 years in financial services I’ve not had many clients bulk at that explanation.

    What is good about RDR is that remuneration is agreed right at the beginning of a sales process rather than at the end. I think personally that is not only good news for the clients and also good news for the adviser as it stops us wasting time on people who are either shopping around or will end up wasting our time anyway.

    At least RDR will now give IFA is a level playing field

  20. If the bank adviser said ‘If you choose not to take my advice then you won’t be charged for this meeting’ then that is accurate, but that’s not what the article says. If the adviser made the statement about not being paid for this advice, but then went on to tell the customer how they would be paid if they do take the advice and set up a bond, ISA etc then what’s the problem. Is this not just a case of a journalist taking a snippet from a conversation in order to create a headline? Maybe they should publish a full transcript of the conversation otherwise it’s impossible to make an accurate judgement.

  21. Phil Younger | 14 Feb 2013 1:59 pm

    How can you have a poster in a window that states free financial review.

    When the only purpose for that review is to sell an investment product that has a charging structure in it to pay for the advice. That is not a free financial review.

    In fact I would go even further that any person who has taken out a product where there has been a poster stating free financial review should be entitled to compensation. The client entered the advisers room under the understanding that any advice given and products sold would be free and therefore no charges should be applied for the advice.

    This is something that large companies like building societies and banks have been doing for years. It’s a basic breach of the principal that no advertising should have misleading comments. The purpose of the meeting is to sell a product it is not to give advice it is to sell a product. The concept of giving advice is totally alien to the bank and building society model and I suspect many of the present players in the market will either concentrate on wealth management for wealthier clients or get out of advice altogether.

    If the FSA is serious about divorcing product selling and advice then it needs to come up with stiffer regulations on who can give advice. If advice is becoming the tradable commodity then accountants, solicitors and so-called financial planners who are not registered with the FSA and don’t pay FSA registration fees should face prosecution.

    I said are advice is a commodity and if RDR is to work then the IFA community needs to put pressure on the FSA to enforce the right of an IFA to have a protected advice industry, after all it is our us the pick up the bill of the FSA.

  22. Pete (Herd)

    Be interesting to find out why someone like you, who is as successful as you clearly are, spends so much time telling everyone else how to suck eggs.

    Strikes me you’ve got too much time on your hands

  23. Ned @ 1016
    I did a role play with a colleague of mine when we were doing our training for a major high street bank. The role play was aimed at planning for retirement. I was playing the client and the following words came out of my colleague’s mouth “there are two ways to fund for your retirement, you can pay into a pension but you’ll be locking your money away and you can’t get access to it, or you can put your money into an ISA where it’ll grow tax free and you can access it at anytime”. I guess the statements are true, however, I know my colleague came from a protection and ISA background and the lesson I took from it was ‘if you only have a hammer, you’ll treat everything like a nail’.
    I left that bank after they told me I was going to be selling protection only.

  24. @ James 12.54pm

    I’m sure they will do mystery shops post RDR as it doesn’t cost them a penny – we pay for it!

    I’m sure you’re right, but they’re not going to get an IFA saying things like “you don’t pay for my advice” when they’ve already completed a fee agreement with them.
    The way things are going they won’t have to worry about quality of advice from bank staff as there won’t be any bank based advisers if the current trend continues.
    I’m seriously thinking of applying to the FSA for a job as it’s the only growth area left in Financial Services. I could be the next mystery shopper walking through your door. Be afraid, be very afraid…..:)

  25. @ Peter Hird. I take huge exception to your patronising remarks Peter as A. Im not “silly” and B. I do not tell my clients Lies.
    In fact your actually the silly one as you cant grab a simple concept. So ill say it again slowly.If i sit down with a client my advice is FREE. If they go away and do nothing I do not charge them. So therefore they have had the advice, they havent paid me anything so it was FREE. If my client wishes me to implement the recommendation (which in most cases happens) I will and he knows that I will receive an Initial fee and an ongoing fee. Am i going mad or is that not so simple a child could understand it???

  26. @Peter Herd
    now you actng like a complete idiot. A free financial review is exactly what it says, nothing more. Perhaps Solicitors should also be banned from giving free one hour consultations as well.
    Better still lets ban Peter from this web page because he loves the FSA so much, or why not apply for a job there , you would fit in very well.

  27. Derek Gair | 14 Feb 2013 2:54 pm

    I like to know why you seem to always come up with a negative comment like your one above.

    I care about financial services and client outcomes, I’m certainly not the most successful consultant in Britain as like many IFA’s I make a living from working long hours and probably a bit too honest for my own good.

    I do get fed up of being tarred with the same brush when I walk into a local pub and the only way of getting financial services to change is to be vocal.

    If you don’t like that that’s fine but I’d really like to know what your opinion is instead of simple derisory comment you often come up with.

    I actually feel sorry for a lot of bank advisers often bullied by aggressive managers, I’ve even had ex-colleagues suffer nervous breakdowns due to excessive pressure. So I’m sorry if you take offence to me been vocal or telling people how to suck eggs as you would put it. I hope that more people like me do speak out, as that is eventually the only way to change the culture. I just hope there are a lot more braver individuals willing to speak out against the bullying cultures of banks and the sharp advertising practices.

  28. RegulatorSaurusRex 14th February 2013 at 4:51 pm

    Essential Ifa Limited is an Active business incorporated in England & Wales on 22nd October 2007. Their business activity is recorded as Activities Of Insurance Agents And Brokers. Essential Ifa Limited is run by 2 current members. and 1 company secretary. 2 shareholders own the total shares within the company. It is not part of a group. The latest Annual Accounts submitted to Companies House for the year up to 21/04/2012 reported ‘cash at bank’ of £3, ‘liabilities’ worth £4,563, ‘net worth’ of £1,888 and ‘assets’ worth £4,427. Essential Ifa Limited’s risk score was amended on 23/01/2013.


    Should spend more time generating new business instead of pontificating.

  29. Richard Wright | 14 Feb 2013 4:36 pm

    Richard, I apologise if you taken offence while the way I phrased my comment was not designed to cause offence and I’m certainly not calling you a liar. So please accept this as an apology.

    The point I am trying to make here is that you are not giving free advice, what you are giving is a free quotation.

    Your analogy to a solicitor is in fact a good example as a solicitor will often give a one are free consultation, that means the client knows what they are getting for that one hour.

    We in the IFA community should not be arguing over the rights and wrongs of RDR what we should be arguing over is making sure that advertising and indeed disclosure should be the same for all.

    You can’t say that you’re giving free advice when the recommendation you’re making involves a 3% fee for implementing a product.

    It’s like advertising beef lasagne with horsemeat in it.

  30. RegulatorSaurusRex | 14 Feb 2013 4:51 pm

    I have nothing to hide if that is should attempt to belittle me – to date I have no FSA complaints which you can check through the FSA register if you wish.

    I also have a number of clients who have been willing to post testimonials online on a site called The best of Ipswich if you’d like a complete your research.

    Maybe you’d like to disclose your real name so I can do a similar check yourself!

  31. Can i throw this is the ring?

    What if your advice is to do nothing?

    Not every client coming through the door will result in a recommendation to do something that will generate an initial charge. Well if you are an honest IFA that is the case.

    Just a thought as usual

  32. @ Peter Herd

    Funny how you keep going on about not advertising anything for free yet on your own website you offer a “free initial consultation”

    Having read all your rants on here I think you should have a look at yourself…………

  33. Can advice be free? Yes

    The reality, however much the FSA and other pontificators preach and moan, is that two distinct areas make this not only feasible but also welcome.

    Firstly, cross subsidies do allow us to offer free or low cost services to those clients where we deem it appropriate. Some advisers will and some won’t. There are no rights or wrongs just plain simple choice.

    Secondly, those offering a ‘free review’ can do so in the almost certain knowledge that some area will be uncovered where action is required and a fee/commission will be paid.

    @ Peter Herd. You are not the only person who has strong feelings about this industry. There is more than one way to skin a cat even if it does seem that relentless regulation is rapidly reducing the options.

  34. Yes my advert does offer a free initial consultation it doesn’t state free advice. The keyword in the advert is initial!!!

    Richard, use the analogy of the solicitor giving the first hour of their time free and this is exactly the same. I hate to keep repeating myself but when you set up a product and give advice the advice is not free.

    If you communicate clearly with your clients what they have been charged for then maybe financial services could move on from this particularly destructive debate.

    Is it no wonder why our industry has such a bad reputation as many think that it is OK to hide charges or dressing things up to give the impression that something is free.

    How many more Panorama, Money Box programmes do we need or even reviews by regulators before we get the message that we need to be upfront about charges.

  35. @ Peter Herd

    Peter, I notice that you website suggests you are ‘chartered’ – surely you are CIOBS level 5 ? Thats Dip IP or PFA isnt it ?

    Listen Pete I’ve GENUINELY nothing against you I am sure you are good to your kids – but seriously you need to go away and do some work and stop telling everyone else how to do it (when, by your own admission you are not the most successful yourself). – thats what winds people up.

    As many have said before there is more than one way to skin a cat and your way is most certainly not the only way AND as I have said many times before, the market – remember that funny old thing thing Peter – will ALWAYS decide who wins and who loses – who suceeds and who doesnt – seems from your own admission you not as successful as you purport to be. Ultimately, markets decide not Peter Herd or FSA or RDR come to that people decide in the end !! You might not like it but the most successful model is not yours I am afraid.

    By the way, have you still got your SPS in the window ? Bet the queue outside is enormous by now.

  36. David

    To take away any confusion I have amended the page on my website to Professional Financial Adviser member of The Chartered Institute of Bankers in Scotland.

    The front page on my website has always shown Professional Financial Adviser.

    To David Glair, Alan Lakey and Others

    Well guys you seem to have got you wish because I’m so fed up of being picked on every single time I have something to say on this site I decided to throw in the towel.

    You guys are so wise and the regulator and consumers are waiting to hear every single thing that comes from your keyboards – you fully represent the viewpoints of everybody in financial services. Apart from me because obviously I’m alone in my opinion along with most of the country who believes that financial advisers are a bunch of untrustworthy individuals who are always hiding charges.

    Well you are right and I do have to get on with some work

    Signing off

    Totally despondent!

  37. David just forgot to say

    Fee free mortgage – so you do not get PAID for arrange a mortgage??? (on your web site)

  38. David

    Can you answer PeterHerd’s last question please as i would be interest to know the answer

  39. The fines are a drop in the ocean compared to the money these banks make from their so called “free” products. The only way they will ever learn is to make sure the banks suffer the same way that they have made their clients suffer and fine them so that it teach them, So that we don’t all of a sudden see a resurrected version of the same nonsense advice arms and bent bankers, pardon the pun!! I must question however, are we not getting to a stage where there will be no viable means from which to get financial advice!? Am I alone in this thought? And why exactly are we here, to keep the buearocrats happy or to provide good, professional, unbiased financial advice – I don’t see people paying for advice? Someone care to put this in perspective?

  40. Peter, I feel I speak for most readers of these blogs when I say that we are all trying to do a good job for our clients and feel deflated when we read comments from people like you which appear as supercilious and smug.

    Get on with your work and leave us to do the same.

    If I want preaching I’ll go to church. Thanks.

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