Which? slams 8.8% commission bank advisers

16 November 2011 8:11 am | By Steve Tolley

Which? has slammed bank and building society advisers after 32 out of 37 gave poor investment advice to its mystery shoppers.

The consumer group has urged investors to see an IFA for financial advice.

Researchers carried out the mystery shopping exercise between August and October. They found that just five of the 37 tied high-street advisers gave good advice while four out of six IFAs offered good advice.

Which? assessed the quality of advice according to whether advisers disclosed their status as tied advisers, explained the Financial Services Compensation Scheme, carried out a thorough fact-find, clearly established the customer’s attitude to investment risk, discussed tax issues and fully explained the product being recommen-ded and its fees and charges.

Clydesdale and Yorkshire Banks failed on all four visits while Co-operative and Britannia advisers passed one of three visits.Five out of seven advisers at the firms, who were all employed by Axa, recommended an Axa investment bond that pays 8.8 per cent commission. They told shoppers that the advice was free, despite it being worth £4,400 in commission.

Skipton Building Society, Yorkshire Building Society, Royal Bank of Scotland Group and Lloyds Banking Group advisers also failed to give good advice on all four visits. HSBC advisers passed two of three visits but Which? says the third adviser was one of the poorest, explaining complex investment options using lots of jargon.

A NatWest adviser told a Which researcher: “let’s face it, the major banks aren’t going to go under,” and handed them a leaflet about compensation, saying: “you don’t have to read this”.

Four out of six IFAs tested were up-front about their independent status and charges and gave suitable advice. The other two incorrectly assessed the shopper’s risk profile and so recommended unsuitable products.

Which? executive director Richard Lloyd says: “Our investigation shows that the high street is not the best place to go for investment advice. If in doubt consumers should always talk to an IFA.”

Derbyshire Booth Financial Management managing director Greg Heath says: “This shows a lack of professionalism and IFAs are often left to clear up the mess.”