Member Article

FSA publishes banking mystery shopper results

The Financial Services Authority (FSA) has today published the results of a mystery shopping review of banks and building societies. The review focused on the quality of investment advice given to customers.

Six major firms in the retail banking sector were assessed under the review, which focused on the advice given to customers looking to invest lump sums. There were 231 mystery shops carried out and the results show that there were concerns with the quality of the advice given in 25% of the visits.

The FSA has confirmed that:

• In 11% of mystery shops, the evidence suggests that the adviser gave the customer unsuitable advice.
• In 15% of mystery shops, the evidence suggests that 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.

The FSA also confirmed that 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, director of supervision at the FSA, said: “Mystery shopping allows us to understand what customers experience when they purchase financial products. 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. 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.”

Andrew Swan, Head of Financial Crime at Newcastle-based law firm Short Richardson & Forth LLP commented: “This is the first time that the FSA has published mystery shopping results since those for Payment Protection Insurance in 2008.

“Having read the review, it seems there were various areas of poor advice, from failing to consider customers’ needs and circumstances to simply giving them incorrect information. There was also evidence of inappropriate use of sales aids and complex risk-profiling tools. Customers deserve better than this.”

The FSA review can be found here.

This was posted in Bdaily's Members' News section by Andrew Swan .