The quality of financial advice given by advisers in high street banks and building societies has come under fire after a mystery shop by consumer watchdog Which?
The undercover sting found only five of 37 bank advisers gave ‘good' advice, with the rest failing in areas including obtaining a fact find, assessing attitude to risk and explaining customer rights under the Financial Services Compensation Scheme (FSCS).
Between August and October this year, researchers posing as retired savers visited bank and building society branches on the premise they had a lump sum above the £85,000 FSCS deposit limit to invest.
They met with 18 advisers claiming there was no cost for their advice. One Yorkshire Bank adviser told the researcher to invest £50,000 in a bond, but did not disclose that this netted the intermediary some £4,400 in commission.
Elsewhere, 17 advisers recommended complicated and high-charging investment bonds but four failed to mention the exit penalties - which were as high as 12% in some cases - if the customer withdrew the money in the first five years.
A Santander adviser gave unclear information about a structured product and claimed the FSA had given the bank "special permission" to invest more than 10% of a customer's money in the product.
FSA rules state no more than a tenth of an individual's assets should be invested in a single structured product without the adviser first conducting further suitability tests.
The Which? research also put independent financial advisers (IFAs) under scrutiny. It found four of the six it assessed gave ‘good' advice.
Richard Lloyd, executive director of Which?, said the investigation suggested consumers "should always talk to an IFA" before investing. He promised to deliver the findings of the research to the FSA. "It's shocking to see such low standards," he said.
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