Tan Kin Lian's Blog: UK - Bank staff mis-selling to be scrutinized under government plans

Tuesday, March 30, 2010

UK - Bank staff mis-selling to be scrutinized under government plans

By Victoria Bischoff 25 March 2010

Financial services firms that force staff to promote and sell products to consumers in order to meet sales targets will be reformed, under plans revealed in the budget this week.

The government has said it will set up a ‘working group’ to consider how staff targets and incentives might lead to poor outcomes for consumers and employees.

This is building on the Retail Financial Services Forum’s remit to make financial services work better for consumers.

The group will meet with a number of banks, consumer groups and trade unions, to discuss the need for reform, before reporting to the Chancellor in time for the Pre-Budget Report.

Unite Union has welcomed this investigation into bank sales culture, describing it as a ‘victory’ for staff in banks across the UK.

Rob MacGregor, Unite national officer said: ‘There is now an opportunity to eradicate the murky practices which put pressure on staff and customers. This new examination by the Government is a win for consumers and a win for those workers on the front line of the banking sector.’

‘Unite members feel uncomfortable with having to pressure customers to invest in products which they often don’t feel they need, simply because the staff have to meet unreasonable sales targets,’ he added.

Consumer champion Which? recently sent out mystery consumers to 37 branches of banks and building societies, and found just four gave consumers good advice to consumers investing a lump sum. Meanwhile, the remaining 33 banks often recommended inappropriate products, failed to properly explain the risks or simply couldn’t get the basics of good advice right.

Which? chief executive, Peter Vicary-Smith, said: ‘Banks and building societies need to buck up their ideas and make sure that their sales practices don’t exploit consumers by encouraging their staff to recommend inappropriate products’.

A spokesperson for the British Banker’s Association said they are not currently aware of any invitation to the new group on remuneration and incentives, but they will be pleased to participate if asked.

2 comments:

Anonymous said...: Is MAS serious about putting in place a proper advisory process in the banks?
Is the short warning on the posters enough ? Is it some kind of warning that you need to open your eyes before signing on the dotted line? Are these warnings disclaimers for them to hide if things go wrong?
Are all these short warning messages on the posters constitute advice or some kind of prequalification before the sale of financial products to walk in customers?
Think about it... I feel it is circumventing the law by appearing compliant.; March 31, 2010 9:57 AM
Anonymous said...: Even though the Sgp economy is recoverying [COE hitting the roof], people like us who have lost in MB, Pinnacle or Jubilee are afraid to invest & lost their trust in FA/RM.

With the lost of trust, it is no wonder Banks and FIs have to do more to protect the retail investors if they wish to continue to sell financial products.

We, the retail investors, must do more to protect our investment by asking the obvious, making use of the cooling period and get black & white for things committed by banks.

e.g.

i) AVIVA is unlikely to default so it is safe. [POSB/AVIVA 2.25% annual return for 5 years]
My Ans: Nobody is safe. We were told Lehman Brothers is solid company and now we know they cook their books e.g. REPO 150 and use our money to insure 6 reference entities and 150 other companies.

ii) AVIVA will pay back something if they default which is very unlikely.

My ans: We should ask further like how much payback if AVIVA default, is there 24 hours on-line value of investment, in what way can AVIVA default e.g. what does AVIVA do to our investment?

The last question is important as it will push the salesperson to review the true nature of this product. AVIVA may use this money to do SWAP or buy stocks etc which is hidden in the prospectus. If you don't read or dig further, signing the application form is basically signing your righs away. When things fall apart, don't bet MAS will help you. They will not.; March 31, 2010 10:00 AM