12th September 2014
The culture of mis-selling and distrust in financial services has been unchanged for a decade as companies put profits before customers.
Sue Lewis, chair of the Financial Services Consumer Panel, has berated the financial services industry for continuing a culture of mis-selling despite a decade of scandals and the financial crisis.
She said the statement from the Treasury Select Committee made in 2004 that ‘it is widely accepted that a lack of consumer confidence in parts of the financial services is deterring many households from saving as much as they might otherwise chose to do’, is as relevant today as it was then.
‘[In 2004] the mis-selling of endowment mortgages and split capital investment trusts were in the headlines. A decade on, we have seen the biggest financial crisis in a lifetime, and still the scandals keep coming: payment protection insurance (PPI) mis-selling, bankers’ bonuses, Libor rigging and more,’ she said.
Lewis said financial institutions had destroyed consumer trust in the whole sector and although people are more likely to trust companies they deal with directly, less than a third of consumers agreed that financial services firms put customers first.
‘Firms want customers to trust them so they can sell more products and services. Nothing wrong with that: firms are there to make a profit,’ said Lewis. ‘What breeds mistrust is when the industry dresses up the message in rhetoric about, for example, the nation not saving enough.
‘Consumers know the motivation is selling. They have also seen enough mis-selling headlines to think they may well be sold something they don’t want or need, but often lack the financial literacy skills or confidence to make their own judgements. Their suspicions are confirmed by an industry that seems incapable of talking in plain language. So they ask friends and family for advice, buy the wrong thing, or buy nothing.’
Unfortunately, Lewis said ‘not much has changed in the past decade or so across the industry’ and warned that the increase in online sales of financial products would bring further risks, such as hidden commission and lack of information.