Author: Rita Lobo
26 Mar 2014
The UK’s Financial Conduct Authority (FCA) has fined Santander an unprecedented sum of £12.4m after mystery shoppers discovered the bank was offering customers flawed investment advice. The fine is thought to be one of the biggest ever imposed on a bank for the quality of its retail services.
The fine comes as a result of a 13-month investigation by the FCA’s enforcement division in which mystery shoppers uncovered systematic failings in the investment advice customers were receiving from the bank. Santander has since closed its investment advice services to new customers. Customers affected will be contacted by the bank and the FCA, and could be entitled to compensation.
The fine is thought to be one of the biggest ever imposed on a
The fine pertains to the services offered by Santander’s Premium Investments, which is no longer available, and the FCA concluded the bank had failed to carry out regular checks to ensure customers were receiving sound and up-to-date advice. The information was gleaned after 231 mystery shopper visits to six major retail banks. According to data released by the Financial Services Authority at the time, around three quarters of clients received sound advice, but there was evidence of mis-selling. Around 11 percent of mystery shoppers received advice that was unsuitable, and in 15 percent of the cases advisors outright failed to even gather sufficient information about the customer to ensure advice was being dispensed appropriately. Close to 15 percent of mystery shoppers were not properly advised on the level of risk they were willing to take on, while 13 percent didn’t even receive basic advice, like suggesting the repayment of unsecured debt.
At the time the results of the original mystery shopping exercise were published, Clive Adamson, Director of Supervision at the Financial Services Authority said: “This review shows that customers are not consistently getting the quality of advice on their investments that they should expect when visiting an adviser in a bank or building society. Since this review took place, we have introduced new rules on investment advice, which have increased the professional standard of the advisers operating in the market and have removed the potential for advisers to recommend products that pay the largest commission but may not be right for the customer.” The FSA has since been disbanded and replaced with the FCA, which then assumed the case.
FCA Director of Enforcement and Financial Crime Tracey McDermott said: “Customers trusted Santander to help them manage their money wisely, but it failed to live up to that responsibility.
“If trust in financial services is going to be restored, which it must be, then customers need to be confident that those advising them understand, and are driven by, what they need. Santander let its customers down badly.”
With the closure of Santander’s investment advice services, many have expressed fears that the general British public is being left stranded from financial advice. Other major UK banks, such as Barclays and Lloyds have also withdrawn from the market.