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FSA mystery shop uncovers concerns over 25% of bank advice

by Alex Steger on Feb 13, 2013 at 09:09

FSA mystery shop uncovers concerns over 25% of bank advice

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;
  • Fact-finding

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.

7 comments so far. Why not have your say?

Sam Caunt

Feb 13, 2013 at 09:27

Had a case just yesterday. Simply a lack of attention to detail, an example of not following though advice and tidying up the loose ends. In truth many IFAs are guilty of this but this news is hardly surprising. It did not require a mystery shop to state the obvious!

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Julian Stevens

Feb 13, 2013 at 09:39

Only 25%? Probably an improvement on what a similar exercise would have revealed just a year or two ago so things are probably improving. One wonders how well a selection of IFA's would have fared. I would hope and expect that we'd do very considerably better and that the results would be published for all to see and to debate in open forum as evidence that the relentless heat of the FSA's flame throwers to which we're constantly subjected is entireley disproportionate to the risk of consumer detriment that we pose. Then again, the FSA doesn't have an exactly great track record of publishing a balanced picture of anything.

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Paul S.

Feb 13, 2013 at 10:14

Banks: make your advisors see 20 clients a week, target them constantly and punitively on number of appointments, number of sales and conversion rate, make it clear that you consider every product suitable for every customer so long as they have disposable income, view compliance as the "business prevention unit" and then express surprise when it all goes wrong.

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Hickky

Feb 13, 2013 at 10:16

So, judging from the timeing, it was Santander who had the enforcement action, so no surprise there then! Mind you I don't blame the advisers, they were only told what to do, and were probably worried about their job if their sales were not great. Its the fault of the system still indoctrinated in all banks and an awful lot of larger advisery groups. Getting a good bonus is great, but too many managers are still living in the age of Direct Sales, where management performance is measured by the success of the team in one measurement, gross income. If a middle manager feels you are not contributing enough income to the team, you are 'managed' out. No proper re-training, no looking at lead quality and certainly not assessing if advice is good, and compliant.

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Compliance Officer

Feb 13, 2013 at 14:37

Bear - Woods

Pope - Catholic

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Peter

Feb 13, 2013 at 15:24

Ah - sales targets for lucrative rubbish products - those were the days.

Strange thing is, when my regional manager closed our branch he couldn't quite get his head round why were all running out laughing, clutching our redundancy cheques!

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Spouse of a banker

Feb 17, 2013 at 11:14

' too many managers are still living in the age of Direct Sales, where management performance is measured by the success of the team in one measurement, gross income. If a middle manager feels you are not contributing enough income to the team, you are 'managed' out. '

this is SJP you are talking about. 1 measure only. Gross income.

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