Bond-flogging bank advisers peddle ‘free advice’ myth

Daniel Grote writes in Citywire: Bank and building society advisers are persisting in peddling the myth that commission-based advice is ‘free’, and providing inappropriate advice in the vast majority of cases, an undercover investigation by consumer organisation Which? has found. The group has highlighted the poor standard of investment advice at banks and building societies in an undercover investigation covering 37 advisers. A separate investigation of IFAs showed four out of six gave good advice. The group said only five of the advisers it investigated gave appropriate advice, while the majority demonstrated a poor understanding of investment risk and made misleading statement about the features and costs. It said 17 of the advisers recommended investment bonds with high charges, in four cases failing to mention the exit fees, some as high as 12%, attached to the investments. Half of the advisers claimed there was no cost for the advice, while in one case a Yorkshire Bank adviser recommended investing £50,000 in a bond that would have generated £4,400 commission, without disclosing this to the undercover ‘client’. Almost half of those surveyed did not mention the Financial Services Compensation Scheme, while others made mistakes about the level of cover that applied to investments. A Santander adviser claimed investments were covered up to £85,000 rather than the correct £50,000 figure, while one Natwest adviser said ‘you don;t have to read this’ when handing over a leaflet about compensation, adding, ‘let’s face it, the major banks aren’t going to go under.’ Which? executive director Richard Lloyd said: ‘It’s shocking to see such low standards. We are reporting our findings to the Financial Services Authority and urging the regulator to investigate and punish the worst offenders. ‘Our investigation shows that the high street isn’t the best place to go for investment advice. If in doubt, consumers should always talk to an independent financial adviser.’ For all your investment needs please call Mark or Clare at GMP Independent Financial Advisers LLP on 0207 2886400