Bank Mis_Selling Advice Fallout

Bank Mis-Selling Advice Fallout.

Last week we published a story that 25% of all bank financial advice was found to be unacceptable following a mystery shopper exercise by the industry regulator the Financial Services Authority (FSA).

The fallout from this is that Santander my look at closing its financial advice arm, putting 880 financial advisers out of work.  It is understood that Santander is one of the banks being investigated by the FSA.

Many banks have already stopped offering financial advice in view of the new rules on agreeing fees before advice goes ahead.

What’s this all about?

RDR, the Retail Distribution review:
Started on 1 January 2013.  It established three tiers of advice.

• Independent Financial Advice: Whole of market advice, higher, degree equivalent minimum qualifications, fee must be agreed with you, commission is banned.
• Restricted Advice: Limited advice, due to areas qualified, specialisation or limited product range, higher, degree equivalent minimum qualifications, fee must be agreed with you, commission is banned.
• Non-Advised Sales/Direct Offer: Offer what you want, no advice, no liability for that advice as there is no advice, full commission can still be taken.

Many banks have already closed their financial arms and given that they would be now found out by the consumer to be paid huge commissions or fees with limited advice and with lower qualified advisers, it is no surprise.  Santander is just another in a long line of banks that are going down this route.

What will the banks do? Continue to offer ‘non-advised’ products, take full commission, and you have no advice protection or comeback.

Fly in the ointment? MMR the Mortgage Market Review

Currently, there is a full scale review by the regulator of the mortgage market following the credit crunch and large scale failings of banks with toxic mortgage debt.

The FSA has confirmed that MMR will require all mortgages to be only arranged with financial advice i.e.  non-advised sales will be banned.

Conundrum: Banks have closed/made redundant their financial advisers.  We wonder how they will handle the mortgage market?

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