Should you seek really seek investment advice from your bank branch?

14th February 2013

It may seem convenient but should you be wary of buying your Isa and pension investments from a bank based financial adviser?
As the BBC reported this week, a mystery shopping exercise conducted by the Financial Services Authority last year found that not all bank and building society advisers are meeting the required standards. Many advisers were not finding enough out about investors and their attitude to risk before they recommended funds. They also overstated potential returns.

The regulator found that the six institutions surveyed were found to be offering advice that left a lot to be desired. The watchdog’s mystery shoppers made 220 visits, posing as people investing a lump sum of £30,000 to £40,000 for growth for a term of at least five years or as someone investing a lump sum of £30,000 to £40,000 for growth for a term of three to four years.

The research found that in 11 per cent of mystery shops, the evidence suggested that the adviser gave the customer unsuitable advice and in 15 per cent of cases that the adviser did not gather enough information to make sure their advice was suitable. The FSA notes, tartly, that it “was not possible to assess whether the customer received good or poor advice”.

If you want to seek the help of a bank sales adviser you may struggle. Santander’s 800 odd salesforce is off the road for retraining and the bank is possibly facing enforcement action. Barclays has shut its adviser force and replaced it with an execution only offering. Many other big high street banks have seriously cut back their sales forces or restricted this sort of service to those who can afford private banking services.

New reforms, where advisers had to obtain more qualifications and charge a separate fee for their advice have put banks off offering mainstream high street advice to their customers on grounds of cost.

But if you can find a bank adviser, as a potential investor, you might want to ask yourself if you would like to take a ten per cent risk that the advice was wrong i.e. in breach of standards set centrally by the regulator. To us that feels like an unnecessary risk to add to any investment risk you may take.

But if you choose to do so, we suggest you equip yourself with information and resist falling for a hard sell. The adviser is meant to assess your attitude to risk by asking you a series of questions but they should not be leading you to a particular answer. If you think they are, perhaps it is better not to seek the help of that adviser. It may also be wise to check if what the adviser is saying about potential performance or any guarantees is backed up in the documentation.

For example, investment in a mutual fund which invests in equities or bonds does not usually guarantee a level of return.

You also do not have to sign up to something you don’t want to. We suggest you consider shopping around. The bad news is that it is more difficult to find an Independent Financial Adviser these days and some will now specify a minimum amount you must have before they will help you. However If you do have a reasonably substantial lump sum to invest as in the mystery shopping exercise, we think you should be able to find an adviser to help. is a good source of information.

There are also a large number of execution only sites which will also furnish you with information about investments though they cannot advise you. It may be that this provokes you into thinking more about what you might want yourself. It certainly minimises the risk of you being steered into the wrong fund, but of course you might decide to do the wrong thing yourself.

But if you decide that you do want to buy funds from your bank, perhaps you should equip yourself with questions to ask the bank adviser to see if you really think they are up to scratch. If you don’t think they are maybe you should find another one.

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