The seven deadly sins in bank advice

I recently became party to a report published by the FSA (Financial Services Authority) in the UK regarding the state of financial advice being provided by banks.  The report was entitled 'The seven deadly sins of bank advice'

If this is going on in the UK then you can probably multiply its effect by 20 for the state of advice being given by banks in Italy.  In a marketplace where approximately 90% of financial services is provided through banks you can imagine how bad it sometimes is. 

1.  Poor risk profiling

Wrong questions being asked, failing to clarify answers and inappropriate profiling tools lead to customers risk profiling being assessed incorrectly and the wrong products being recommended. 

2.   Failing to consider customers needs and circumstances. 

Banks advisers failed to collect sufficient information regarding income, assets and financial commitments to ensure that the recommendation given was suitable for the customers circumstances. 

3.  Failing to consider the length of time the customer wants to hold the investment. 

Bank advisers recommended medium to long term investments when the customer had clearly stated that they may need the money in 3-4 years 

4.  Inappropriate financial incentives sales targets and performance management

Even though advisers were given all the information to make the right recommendation they still offered the wrong product.  It lead the FSA to believe that other factors influenced the decision of the adviser in making these recommendations. 

5.  Failing to give customer the correct information.

Advisers gave information that was unclear and unfair and were providing suitability reports with inaccurate information. 

6. Inappropriate use of investment sales aids

Emphasis was placed on positive performance related figures and often did not reflect or indicate the potential for losses. 

7.  Weakness in bank controls

Failure to provide accurate suitability reports and information may lead to harm should customer ever need to complain. 

Whilst there are plenty of Independent advisory firms that might be guilty of similar practices  the report specifically identifies banks as being the main culprits in this report.    I am happy to say that The Spectrum IFA Group has one of the most rigorous compliance processes in the International Independent advice sector and therefore we aim to ensure that our customers are protected from the complaints listed above.  

If you would like further information you can contact me on gareth.horsfall@spectrum-ifa.com or call me on 3336492356