Thumbs down: How the banks fare when it comes to financial advice

Co-operative and Britannia

Investment bonds were recommended by all three advisers, although only one met the criteria for suitable advice.

Two Britannia advisers, who actually worked for Axa, recommended Friends Life bonds that paid 8.8% commission, although one did not tell the researcher about this.

One adviser rushed through his fact-find without asking the researcher’s age, previous experience with investments, or asking any questions about their attitude to risk.

A Co-operative adviser told the researcher to put £40,000 into an investment bond run by Aviva and a Guaranteed 100 fund, but did not explain what this was, nor the annual charges, and failed to even mention it was from Aviva.

HSBC

Two advisers gave “excellent” advice on how investments work, product recommendations, charges and rights to complain.

A third rushed through an explanation of complex investment options, using lots of jargon, before even carrying out a fact-find to establish the researcher’s needs

He made no mention of product charges, FSCS limits or the Financial Ombudsman Service.

On four occasions the researcher said he did not want to take on much risk but the adviser’s final recommendation was to put 83% of his money into a risky fund that was “totally inappropriate” for him.

Nationwide

One adviser was “incredibly thorough”, asking lots of questions to establish the researcher’s goals and recommended appropriate products to meet their needs.

The second incorrectly assessed the researcher’s attitude to risk, and decided to place 80% of his money into investment funds

A third failed to mention the FSCS and refused to suggest a savings product for the proportion of money that was recommended to keep as a cash deposit

The final adviser was good at describing products and charges, but recommended only long-term products, leaving the researcher with no immediate access to any of her money.

Halifax

All four advisers failed to discuss FSCS limits with the researchers and three recommended a Scottish Widows Personal Investment Plan (PIP), an investment bond that was sprung onto the researchers at the end of their meetings with very little explanation.

On Halifax’s website it states that ‘if you want to claim age-related personal allowances, tax credits, pension credits or social security benefits, please be aware that this plan could affect your entitlement to them’. Given that all the researchers were aged over 60 and one that visited Halifax was aged over 75, they could be affected by this.

One adviser didn’t feel that the researcher should take any risk, and instead recommended it was all placed in Halifax savings accounts – exceeding the FSCS deposit limit.

Lloyds TSB

The Lloyds Banking Group was the worst offender for talking about free advice without explaining that it is paid for via commission from product charges.

None of the advisers explained the PIPs to the researchers, simply springing the plans on them in their final recommendations. This was poor practice as the plans carry early-exit penalties and an element of life assurance that needed explaining in detail.

One adviser failed to carry out a fact-find, provide product brochures or talk about the FSCS, and did not declare his status as a tied adviser. He also failed to make a clear recommendation.

Two out of the three advisers failed to provide a ‘key facts’ brochure – a regulatory requirement.

Natwest/RBS/Ulster Bank

Despite each of the researchers booking an appointment specifically with a financial adviser, three of the four first met with customer advisers who were not qualified to talk about investments.

One of the elderly researchers had to wait for more than 75 minutes in the branch before getting to see the right adviser, while another carried out two visits to a NatWest branch but did not receive a final recommendation.

A structured deposit called an Autopilot Bond, which pays interest linked to four stock markets, was recommended to two inexperienced investors, yet neither adviser mentioned early exit penalties or talked about their tax treatment.

Santander

One adviser was thorough in explaining product charges, with a unique and effective way of explaining risk and reward.

Another gave misleading information about early access to a one-year fixed-rate bond, stating that the only way the researcher could get his money out was ‘if he died’. The same adviser also started to recommend products before finding out the researcher’s attitude to risk or even his age.

Another adviser gave unclear information about a structured investment product, stating that the FSA had given Santander special permission to invest more than 10% of a consumer’s money in the product.

Yorkshire Building Society

Two advisers did not seem comfortable discussing taxation on investment products with the researchers: one did not mention the impact of tax at all, while the other disclosed what a product might return before tax but not afterwards.

One adviser recommended putting 70% of the money into a complex tax-deferred investment bond.

Credit Suisse ‘structured deposits’ were recommended twice, although one adviser failed to even explain the inflation risk and potential early-exit penalties.

Another adviser’s recommendation was especially hard to decipher as it was scrawled on a brochure instead of formally written.

Skipton Building Society

Skipton’s way of assessing its customers’ attitude to risk was poor, with the first question consisting of investors having to choose an investment based on four fictional lines representing the value of their money at different points in time.

Advisers did not provide much help in explaining what the graph meant and were poor at explaining where the researchers’ money would be invested according to each of their recommendations.

One adviser recommended more than £40,000 be invested across three different investment funds, although he did not tell the researcher what was in those funds. He said he was choosing a particular fund as ‘it’s always been above the average,’ even though past performance should not be used as a reliable guide for future investment.

Yorkshire Bank/Clydesdale Bank

Six independent financial advisers were also visited by Which? and fared considerably better:

All the IFAs were completely upfront about their status as independent advisers and most explained exactly how they would be remunerated, either as an hourly fee, a percentage of the lump sum the researchers wanted to invest, or through commission taken from product fees.

Five of the six advisers mentioned the FSCS – compared to the 48% of bank and building society advisers who made no mention of it at all

After thoroughly assessing the researchers’ attitudes to risk, three advisers decided that any investments that put their money at risk were not appropriate for them. Instead, they advised our researchers to keep their cash in savings accounts.

Two incorrectly assessed the needs of the undercover researchers and recommended products that were either too risky or unsuitable.

One IFA recommended two investment bonds to, totalling 80% of the researcher’s money. Although he never said he would be taking reduced commission, the adviser never revealed how much he’d be making from the bonds.

Another IFA recommended a with-profits bond, despite not explaining how they work, are taxed or product charges.