Banks offering risky advice, claims Which? - Banking - News - Moneyfacts

News News brings you the latest financial & economic news & reviews of the best products in the UK by our team of money experts.

Banks offering risky advice, claims Which?

Banks offering risky advice, claims Which?

Category: Banking

Updated: 13/12/2012
First Published: 16/11/2011

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
An investigation has found that many high street banks and building societies are giving poor advice and recommending inappropriate investment products.

Which? found that the vast majority of advisers in banks and building societies have a poor understanding of investing, and made misleading statements about the features and costs of available products.

Examples included advisers recommending complicated bonds, not mentioning high exit fees and some claiming there was no cost for their advice.

For instance, 17 recommended complicated and high charging investment bonds, with four of the advisers failing to mention that these came with hefty exit fees - sometimes as high as 12% - if you want to get your money out in the first five years.

Of the 37 branch advisers that gave advice in the investigation, 18 claimed that there was no cost for their advice.

Banks and building societies make money through commission paid for the products that they recommend, but only a handful of advisers were upfront about it.

In the worst case, one of the researchers was told by an adviser to invest £50,000 in a bond netting more than £4,400 in commission, this was not disclosed.

Almost half of the advisers failed to mention the Financial Services Compensation Scheme, with others unaware of how much protection consumers receive.

One adviser said the scheme covered £85,000, not £50,000 as is actually the case for investments, while another gave researchers a leaflet detailing the scheme but said they didn't have to read it as the UK banks 'aren't going to go under'.

"Now, more than ever, consumers need advice they can trust on what to do with their money, said Richard Lloyd, executive director of Which?

"It's shocking to see such low standards. It's also disappointing to see that things haven't improved in the past year, despite two high street banks being fined for advice failings and poor complaints handling."

The findings are to be passed on to the Financial Services Authority, with the regulator being urged to punish the worst offenders.

By contrast, it was found that of six independent financial advisers that were put to the test, four gave good advice.

"Our investigation shows that the high street isn't the best place to go for investment advice," Mr Lloyd added.

"If in doubt, consumers should always talk to an independent financial adviser."

Find the best bank account for you - compare bank accounts

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

Debit card spending still leads the way

Many of us turn to plastic at the tills these days, particularly as contactless technology makes it easier than ever before. It’s little wonder that card spending continues to ramp up – and it’s debit card spending that’s leading the way.

Current account switching to be made even easier

It was announced today that the Current Account Switch Service (CASS) will be undergoing improvements that are to be implemented in a year’s time. This should help give more customers and businesses the confidence to switch to a better bank account.

A quarter of all card payments now contactless

The rise of contactless payments shows no signs of stopping, with new milestones being hit on a seemingly monthly basis. Well, another one has arrived, with new data showing that a quarter of all card payments are now made via contactless means.