Banks not giving adequate investment advice, says FSA
One in four investors are not receiving good enough advice from their bank, a mystery shopping review by the Financial Services Authority shows.
That includes one in 10 investors, who actually received advice that was bad for them, according to the watchdog's survey of six major banks and building societies.
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The "disappointing" findings showed 11% of customers received detrimental advice, while a further 15% found their advisors did not have enough information to give customers suitable advice.
One major firm, believed to be Santander, could now face a fine from the FSA, after coming out much worse than the others, who have all agreed to retrain advisers and launch an independent review of their advice services.
Neither the watchdog nor Santander will confirm the bank's identity.
Today, Santander announced it is delaying the return of face-to-face advice for new investors for an undetermined period, after it halted the service in December.
The FSA's mystery shopping review was carried out between March and September 2012.
It says the advice was harmful for customers because it did not take into account:
- The level of risk customers were willing and able to take (15% of mystery shops).
- Their financial circumstances and needs. For example, advisers were failing to recommend that unsecured loans should be repaid, where this would have been the right option (13%).
- The length of time customers wanted to hold the investment for (6%).
The review focused on customers with £30,000 to £40,000 to invest for between three and five years.
The products in question offered included shares, bonds and savings products.
'Not getting quality advice'
Clive Adamson, director of supervision at the FSA, says: "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.
"Since this review took place, we have introduced new rules on investment advice which have increased the professional standard of the advisers operating in the market and have removed the potential for advisers to recommend products that pay the largest commission but may not be right for the customer."
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