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FSA mystery shop uncovers concerns over 25% of bank advice
by Alex Steger on Feb 13, 2013 at 09:09
A mystery shopper exercise by the Financial Services Authority (FSA) has uncovered concerns over the quality of advice given by banks and building societies in a quarter of all cases.
The regulator found that in 11% of mystery shops ‘the adviser gave the customer unsuitable advice’ and that in 15% of mystery shops the adviser did not gather enough information to make sure their advice was suitable - so it was not possible to assess whether the customer received good or poor advice.
One of the firms involved in the exercise has been referred to enforcement as a result.
The FSA said the main reasons for poor advice were that advisers’ recommendations were not suitable for:
- the level of risk customers were willing and able to take (15% of mystery shops);
- customers’ financial circumstances and needs, for example, advisers failing to recommend the repayment of unsecured debts (such as loans), where this would have been the right option for the customer (13% of mystery shops); and
- the length of time customers wanted to hold the investment (6% of mystery shops).
Clive Adamson, FSA director of supervision, said: ‘This review shows that customers are not consistently getting the quality of advice on their investments that they should expect when visiting an adviser in a bank or building society.
‘Whilst we are disappointed by the results of this review, we are encouraged by the action that the firms involved have taken to rectify the situation for their customers.’
The FSA assessed 231 mystery shops across six firms.
It found fault with the following:
- Risk profiling questionnaires and tools;
- Risk categorisation;
It also found that advisers failed to consider the length of time customers wanted to hold the investment, failed to give them correct information about how they paid, and used inappropriate investment sales aids.
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