Banks - Treating Customers Fairly (Badly)

Banks – Treating Customers Fairly?

The Financial Services Authority (FSA) have a long standing aim/theme named Treating Customers Fairly (TCF) for those in financial services.
Many IFA firms spend large sums of money and/or commit huge resource to ensuring that they not only act in the spirit of TCF (and frankly without that, as a small business they would wither and die anyway) but also comply with the TCF guidelines.

Yet it would appear big name banks, both private and high street, whilst outwardly appearing to comply with TCF guidelines don’t actually treat customers fairly in many ways.

This was picked up by the weekend FT (see link below) where they discussed how now even the private banks, whose traditional focus was on excellent customer service, are now simply trying to cross-sell more product in order to remain profitable, as simply having customers holding accounts makes them no or little money – or even loses them money.

So what we are hearing is that banks don’t make money by selling their core business proposition so they think it is alright to sell (often) non suitable product to their customers to make up their profits. Hardly Treating Customers Fairly?

http://www.ft.com/cms/s/2/d2bf65be-f3f1-11df-901e-00144feab49a.html#axzz1609LK54U


I have posted and discussed on a number of professional forums about the less than savoury tactics of banks and below I have copied a number of replies.
It is a shame that banks (even ignoring the current bad feeling towards them post credit crunch) have been unable to stay profitable at what they should be doing (banking)
– it reminds me of the Royal Mail. When I go into my local main post office all I normally want to do is post a special delivery parcel and get out again but the people behind the (franchised?) counter are more interested in selling me holiday money or contents insurance…

Below, my posts are labelled, otherwise they are anonymous here but were named on the original posts on professional private forums.


IG – posted Oct2010 : Banks - Private Wealth Managers?I have noticed a number of my clients have had renewed and vigorous attention from their banks recently either upselling them to a private banking service or if already subscribed, trying to sell them what are essentially multimanager portfolios dressed up as full wealth management.
A few have then attempted to (at worst) rubbish my advice or (at best) just start to attempt to undermine the client and ask questions of me.
On the one hand I am entirely open to this and welcome the opportunity for my advice and value to be queried by a third party and I am happy to stand by my advice and service.
But at the back of my mind I am thinking that the high street banks are not making money elsewhere and need to sell this type of service - thus they are throwing a lot of money at pushing these services - far more than I can ever do.

REPLIES: I have just had a simular battle with Lloyds TSB and Barclay's private banking. The client had used them for some time. The client was not aware of the cost of these services as they had never been explained to him.
"The level of personal service has never been as good with the banks as it is with me", his words not mine.
He has had a least 2 different account managers in 3 years.

REPLY: Your strength is the level of personal service that you provide for your client ,which a bank cannot provide, even though they will promise to.
Ian, knowing you as I do I would simply point to experience and excellence - have recently "won" over £3million from a Bank and their Wealth Management arm, based on doing what we said we'd do, providing a broader spread of advice than just the "product" (a perfectly fine one, but no tax considerations given) recommended by the Bank, and our reputation/ integrity, built locally and further afield over many years. Like the internet, Banks tend to provide excellent information, when what is really needed is wisdom and knowledge.

REPLY: Previously I worked in a Private Banking environment and clearly understand your point raised. It has, and still does, sadden me that Banks create the impression that they are the first and last line in administering all things financial, including financial planning advice. I have witnessed first hand the aggressive 'pitch' that these so called financial experts use to 'entice' their prey (sorry, I mean clients). I always resisted this approach and preferred to deal with my clients fairly and without bias...........obviously, taking a professional and ethical stance with my clients did me no favours when it came to hitting the ludicrously high 'sales' targets set.
I am pleased to say that I am now working as a fully fledged IFA and am happy to take on the 'might' of the banks financial advisors because, having experienced first hand the general levels of incompetence, I know that greater professionalism and knowledge will prevail through the IFA medium.

REPLY: In terms of what you can , in my mind, is quite simple. Keep being the expert financial planner you are. There is no way that these advisors will provide the levels of service, information and quality advice that you can. The one thing that is of enormous advantage to us as IFA's is that we will not grow bored of our clients. I guess it is a fact of life that we will always lose the odd client to competition but in the main, given the amount of personal and professional commitment we give to our clients, this should see us prevail.
Naturally, any clients that are lost, we should be prepared to quickly welcome them back once they have seen their serious error of judgement.

IG post – Sept 1010 A client gave me valuation sheet prepared by [High Street Bank] Financial Planning1. still lists PEPs
2. PEPs listed as owner=joint
3. ISAs listed as owner=joint
But this is the best bit - under the "valuations summary" it says:
"This information has been prepared...as part of our committment to client service and does not represent an official valuation of your investments...B******s Financial Planning makes no representations or warranties to you about its accuracy or completeness"
So, a valuation that is not a valuation, and if it is, don't expect it to be complete or accurate!


IG Post – Aug 2010: A few years back I recommended Chelsea Building Society for a client of mine for an instant access deposit account.
They had decent rates and crucially, were just down the road from the client who puts great stock in being able to walk into a branch.
Despite me sending in the forms they have continued to try to cross sell the client over the years - this is the latest! :
Remember - this is cash the client needs for instant access...
A 1 year fixed bond paying 6% (so far so good-ish)... combined with an Aviva 5 year defined returns fund - so returns dependant on FTSE100, counterparty risk, money locked away for 5 years...all for a client with low risk profile...
I have just spent 20 mins with this client explaining the above because they left the meeting with the impression it was low risk and instant access.
You can't make this up...

REPLY: Nationwide is another who have done similar things and I could name others. You recommend a client keeps money back for short term needs and emergencies and these clowns come along and stitch up the client. And it is you or the client that pays for putting it right. Then there is the scam whereby you go into the bank to improve the rate that you are currently getting having seen it advertised but you cannot get the best rate unless you meet with their branch adviser. It is then denied that this is the case when you phone in to head office.......

REPLY: Hi guys I've had this with the Halifax - I recommended a 1 year fixed rate bond to client - they provided her with an Investment Bond.
By the time I saw documentation some 6 months plus later client's plan had gone up in value but she couldn't get out without a tax charge due to income etc. She wouldn't complain as she didn't like to make a fuss.
I saw copy of SR which said nothing about it being short term monies and that Tax Planning etc not covered as client had her own IFA doing this for her!!!! Well I was until some stupid so called bank employee stuffed up what I had been doing for her.....
The staff member was not happy when I questioned why this had been done - my client thought it was instant access as he'd told her there were no exit penalties (correct - but forgot to tell her about potential tax penalties on encashment etc etc).
Next time I recommended a client did cash (same one incidentally) I went and picked up the application and completed it on her behalf and although I didn't go in with her to set up the plan advised her to say "no" to their pressure to see an adviser..... Incidentally, when I asked for the application in the branch on her behalf, they didn't want to give it to me as the people behind the counter said I "couldn't advise clients on their products, only their advisers could" I couldn't stop laughing once the red mist had disappeared!

REPLY: Hi all, a very interesting debate, and one which sadly, will go on and on until the Banks are held accountable for their aggressive sales tactics. I have, unfortunately, worked in this environment in the past and am all too aware of the strategies employed by these 'so called money experts' - said by the way in the loosest possible terms. I am pleased to say that I have now left this petty and arrogant environment behind having refused to follow their rancid code of conducting business. Like you all, our clients deserve advice with integrity and merit and only when they can be steered away from this vile culture can they truly access such advice.

REPLY: Don't you just love 'em.....clients looking for life and CIC ask Lloyds. it comes in at a competitive price, but everyone forgets to mention that it is reviewable. Luckily I manage to get to them before they sign on dotted line, and for £1 more get them guaranteed premiums and cover them for 10 more critical illnesses.
Having discussed this with someone I know who used to work for Lloyds, they said 'oh yes, they get more points towards their targets for reviewable', we were told to sell our cover on the basis that we are much more reputable than an IFA being a high street bank, even if it costs them more! it may well have been going to be put in the SL by Lloyds, but sure as hell no-one was going to bring their attention to it!!!
I just don't understand how they get away with it,

REPLY: I recall a broker consultant from one of the bailed out banks telling me that even though he had increased his sales because he hadn’t hit his target on a certain product sales he wouldn’t be getting a bonus.
This just proves that banks target specific products to the detriment of clients.

IAN: And in closing, my final bug bear, which I’ll compile a few examples of for another post is adverts showing interest rates that look comparable with standard deposit rates yet have either complex financial instruments behind them or multiple requirements that benefit the bank before you get the rate…