'One in four' gets bad cash advice

SantanderOne in four consumers was given poor or misleading advice on how to invest their nest eggs by high street banks and building societies, an undercover probe by the City watchdog has revealed.

The Financial Services Authority (FSA) carried out 231 mystery shops at six major firms between March and September last year in order to discover the quality of advice given to customers looking to invest a lump sum.
Three-quarters of customers received good advice but in 15% of cases the adviser did not gather enough information to make sure that advice was suitable. On 11% of occasions the advice was not appropriate for the customer's circumstances, the study found.

Santander said it was one of those tested and in December it took 800 investment advisers "off the road" for re-training, a process which is ongoing. The move is thought to have been partly prompted by the FSA sharing its information with the banks involved, as well as industry-wide changes to the way that customers pay for advice.

It is understood that Santander is being investigated by the watchdog, which could potentially lead to enforcement action being taken.

In the wake of recent scandals, the FSA said all firms should consider whether their incentive schemes increase the danger of people being mis-sold products which are unsuitable or too risky and put controls in place to prevent this.

The study found examples of advisers failing to recommend that customers should pay off their debts when this would have been the right option.

In one in 20 mystery shops they also failed to properly take into account the length of time that a customer wanted to hold onto an investment for.

In some of the mystery shops, advisers gathered the information necessary to be able to determine what would have been suitable for the customer but still recommended an unsuitable product.

The report said: "We expect all firms to consider whether their incentive schemes increase the risk of mis-selling and to put in place adequate governance and controls to prevent this. We will carry out a review later in 2013 to see whether firms have acted on our guidance."
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