Tag Archives: sales practices

How RDR Impacts Investors

2 Jan

The Retail Distribution Review (RDR) comes into force from Monday 31 December 2012, but what does this mean for those who are paying for advice?

There has been an overhaul of the disclosure of what you pay, how you pay and the advice (at point of sale and ongoing). The idea being that the advice received is suitable, you are aware of any restrictions i.e. independent or restricted; and the associated costs. 
I am an independent financial adviser (IFA) under the old and new regime. The service provided has always been detailed with an ongoing service as the advice process starts with the purchase of a financial product and on-going advice is paramount (in my opinion). Make sure you receive what you are and have paid for – 
Lord Turner FSA living wills proposals
The Financial Services Authority (FSA) outlines the changes which will directly impact – and hopefully benefit – the everyday investor:
1. Know how much advice costs
“Advice has never been free. You may not have realised but if you received financial advice before our changes came in you probably paid ‘commission’ to your adviser.”
“This generally came from the company providing the product paying your adviser a percentage of the sum you invested.
“Instead of you paying commission on new investments your financial adviser now has to be clear about the cost of advice and together you will agree how you will pay for it.”
“This way you know exactly what you are paying and that the advice you receive is not influenced by how much your adviser could earn from your investment.”
“Your adviser now has to clearly explain how much advice costs and together you will agree how you will pay for it. This could be a set fee paid upfront or you may be able to agree with your adviser that they can take the fee from the sum you invest.”
2.  Know what you are paying for
Is this a transactional item, on-going advice and defined service to be provided.
While many advisers are remaining independent, some have changed their business models so that they only give “restricted” advice.
“Financial advisers that provide ‘independent’ advice can consider all types of investment products that might be suitable for you. They can also consider products from all firms across the market.”
“An adviser that has chosen to offer ‘restricted’ advice can only consider certain products, product providers or both.”
“Your adviser now has to clearly explain to you whether they offer one or the other.”
Get improved professional standards“Some investments can be hard to understand. So the minimum professional standards of qualification have been increased….”
“Financial advisers also have to sign an agreement to treat you fairly.”
3.  What should you do now?

“Next time you see your adviser you should ask how much you have been paying for their advice and how much that same advice now costs.”
“They should also be able to explain how the changes to the way you get and pay for financial advice affect you, and whether they offer independent or restricted advice.”
Happy New Year and good luck investing in 2013

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Which? Research – Bank Staff Under Pressure to Sell

18 Dec

Big Change consumer banking event

It’s a damning review from the Which?’s Big Change survey. 

One of the many reasons I chose to become an Independent IFA – no sales targets and my mantra is “service, service, service”.

In the past I have worked within large institutions, although not the banks, and the importance of “sell at any cost” was a common practice. I have known many where their role was to sell and felt it was their choice (the client) to trust them and so what was purchased was solely their decision. If your very livelihood is dependent on “sell at any cost” and there is an environment of targets and not service, and this is the “norm” and acceptable, then many will and have been manipulated.

The Which? investigation suggests pressure on bank staff to sell financial products has not reduced, despite demands for change from regulators and politicians.

In Which?’s Big Chance survey of over 500 front line bank staff, conducted in September:-

  • 81% say the pressure to meet sales targets has stayed the same or risen
  • 66% say they are usually told to sell more
  • 41% say they thought there had been a decrease in the incentives available.
  • 46% say they know colleagues had missold products in order to meet sales targets
  • 40% say they were sometimes expected to sell products even when it was not appropriate for the customer

Customers feel the pressure

Which? is calling on all the banks to refocus their incentive schemes on customer service.

Further research from Which? found that customers are feeling the effects of the pervasive sales culture in Britain’s high-street banks :-

  • 40% say the last time they contacted their bank they were offered a new product or service that wasn’t suitable
  • 25% felt pressurised to take up the product

Staff were interviewed from HSBC, Royal Bank of Scotland, Lloyds Banking Group, Barclays and Santander.

Which? is handing in a dossier of evidence to the Parliamentary Commission on Banking Standards. The dossier includes the bank staff survey, consumer views and previous research on the banking industry. This is in addition to 120,000 signatures from the general public pledging their support for ‘Big Change’ in banking with Which? and 38 Degrees.

Which? chief executive Peter Vicary-Smith says: “We are calling on the banks to be much more transparent about their sales targets and incentives.

“Our survey reveals the stark realities of the sales culture that still exists at the heart of the banking industry. Senior bankers say the culture is changing but this shows it just is not filtering through to staff on the front line who remain under real pressure to put sales before service, even after incentives are taken away.”

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FSA Publishes March 2012 PPI Misselling Figures

30 May

The payment protection insurance (PPI) mis-selling scandal has cost financial services £1.375bn so far this year, according to FSA payout figures.

The City watchdog’s monthly PPI refund and compensation figures show an additional £499.5Million claims for March. This brings the overall total to £3.5Billion since the regulator began recording figures January 2011.

The numbers are still rising significantly, from £403.4Million in January 2012 and £472.5Million in February 2012.

 My contact details are :- tel 029 2020 1241, email welshmoneywiz@virginmedia.com, twitter welshmoneywiz, linkedin Darren Nathan

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SIFA Slams St James’s Place

6 Apr

St James’s Place (SJP) is a well respected Insurance and Investment Company who still work solely through a self-employed sales force. The down side is they are not independent but have many proficient sales people who will offer the best of the product range they can sell.

The outrage is from the Solicitor IFA trade body Sifa, who have accused St James’s Place of making “distinctly misleading” claims and it raises concerns where an institution who gives financial advice sees it to be acceptable to allow dishonest business practices. SJP has written out to financial advisers in an attempt top attract them to join St James’s Place, while suggesting that they can continue to receive professional introductions through solicitors.

This is not the case as solicitors are governed by a strict code of practice to refer only suitably qualified independent financial advisers and this can’t be a sales person from SJP. SJP’s sales people are called Partners and Senior Partners depending their success and longevity in selling their products.

SIFA has reported SJP (St James’s Place) to the Solicitors Regulation Authority.

The SRA’s code of conduct states solicitors can only refer clients who need investment advice to “independent intermediaries”. It defines an independent intermediary as an IFA who can advise on investment products from across the whole of the market and offers a fee option.

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FSA Fined Coutts & Co for Control Failings

26 Mar

There are clearly fundamental flaws within many banking institutions and Coutts is the latest to suffer a reprimand for their tardy and less than suitable attitude.

The FSA has fined Coutts & Co £8.75 Million for anti-money laundering control failings. These failings included taking reasonable care to maintain effective anti-money laundering systems and controls. The Financial Services Authority (FSA) said the failings at Coutts were ‘serious, systemic’, and led to an ‘unacceptable risk’. Tracey McDermott (acting director of enforcement and financial crime) at the FSA, said: ‘Coutts’ failings were significant, widespread and unacceptable. Its conduct fell well below the standards we expect and the size of the financial penalty demonstrates how seriously we view its failures.’

In October 2010, the FSA started an investigation following a routine visit and found a lack of robust controls and consistent monitoring. A sample of 103 files of politically exposed persons were examined and 71% had deficiencies (i.e. in 73 or the 103 files examined).

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Payday Loan Companies – Why This is So Wrong

7 Mar

I have been warning people of the unacceptable business practices currently being allowed as I believe this takes advantage of people in financial fifficulty. I am sure you will have seen one of the many television adverts offering loans in minutes at rediculous rates of interest, say 2763% APR. The government needs to improve regulation in the debt and credit industries to protect consumers.

A cross-party MP committee has attacked poorly regulated payday loan and debt management companies for causing people unmanageable debt problems. The news comes as the Office of Fair Trading (OFT) launches an investigation into these practices. The Committee is also asking the government to act swiftly should the OFT investigation reveals any evidence of non-compliance within the market. The idea being if self-regulation cannot deliver enough protection the government must intervene with statutory regulation.

I believe the practice to borrow money this week and pay back next week causes spiralling debt, which quickly becomes un affordable. If there isn’t sufficient income to pay bills, it is pretty clear that borrowing from Peter to pay Paul leads to more borrowing next week? Next week comes and you borrow more to payback both the loan and the interest running up larger and larger debts.

Research by Consumer Focus showed that customers had on average over three loans, while insolvency experts R3 claimed that a third of people who take out a payday loan have to get another one because they can’t afford to pay it off.

Please make comments as this practice is wrong.

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Financial Ombudsman Service Top Ten Business Groups Complaints List

28 Feb

Someitmes, as the adviser, you forget the quality of service offered in the “advice” world and so it is healthy to review the stats just to remind oneself.

I am a financial adviser (IFA) who has specialised in Investment & Tax Planning. I spend my working life trying to do the best for my clients. It is clear to me that each and every one who I advise, support and guide have placed their trust, wealth and financial well-being in my hands. I will always do my very best fopr them, wherever I can.

In comparison, the volume and type of complaints clearly identify that there are moany out there whos’ role is simply to sell whatever they can and without due care and consideration for the end user – there clients.

I think the figures speak for themselves.

The Financial Ombudsman Service deals with complaints about financial products, sales and associated issues. The majority of these complaints were upheld i.e. 93% against RBS, 87% against Lloyds TSB, 84% against Barclays Bank, 80% against HSBC, and 55% against Santander.

Payment Protection Insurance claims – 11% upheld against Capital One, 98% against Black Horse, 99% against Lloyds TSB, and 87% against HSBC.

 

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Payment Protection Insurance Mis-selling Claims Paid Over £2bn in 2011

22 Feb

 Be aware of the difference between financial product sales and financial advice.

The claims paid in 2011 for Payment Protection Insurance (PPI) mis-selling almost reached £2bn in December 2011 (figures provided by the Financial Services Authority (FSA)).

If you are a victim of this mis-selling, complain and ask for compensation; it is your legal right if you suffered at the hands of this horrendous treatment. Although, please do not take advantage of the system if you are not a victim of this crime. The concern being, there is growing support for the mentality to accuse, sue and/or exaggerate to make a financial gain, no matter that you didn’t suffer the crime. Please utilise your Rights but don’t abuse your Rights.

In this case there is no smoke without fire as the final cost of payments for actual mis-selling is expected to reach possibly over £8bn

 

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Lloyds takes back £2m of bonuses paid to executives (Article in BBC Business News on 20.02.2012)

20 Feb
Lloyds Banking Group is taking back bonuses worth £2m from 10 executives, including the former chief executive Eric Daniels, the BBC has learned.

Four of those affected were board directors.

Mr Daniels is expected to lose between 40% and 50% of a £1.45m bonus, or between £600,000 and £700,000.

BBC business editor Robert Peston says they are being penalised over their role in the mis-selling of payment protection insurance (PPI).

This involved the sale of insurance that, in theory, covered repayments if borrowers were unable to continue repayments through illness or unemployment, but in many cases those taking out the policies would not have been eligible to claim on them.

Our business editor says three other board directors are expected to see about £250,000 of their bonus taken from them.

About six other executives, below board level, would lose around £100,000 each.

This is the first time a British bank has taken back bonuses from executives, following a financial performance that was worse than expected.

“The clawback of bonuses is important for its deterrent effect”

The return of some of the bonuses, which were demanded by regulators after the banking crisis of 2008, are being made after pressure from politicians and the Financial Services Authority.

Results

Lloyds Banking Group is the UK’s biggest lender and owns the Halifax, the Bank of Scotland and the Cheltenham and Gloucester.

It has been forced to set aside £3.2bn to cover compensation for those customers who were mis-sold PPI.

The bank will publish its results this Friday and is expected to announce a loss of about £3.5bn.

The bank has not yet formally announced its plans for the return of some of the bonus money.

Its current chief executive, Antonio Horta-Osorio, said in January he would not take an annual bonus for 2011.

Our business editor says the move may have a deterrent effect in future, making bankers more likely to consider the consequences when they launch new products or do assorted deals.

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Blog: The complexity of simple products (Article by Owain Thomas in IFAonline.co.uk on 15.02.2012)

15 Feb

Phil Jeynes warns that removing components from simple products may mean weaker cover for clients.

Nobody so far has been able to explain to me exactly what they mean by a “simple product” in the context of protection.

Whenever I’m asked if I think simple products are a good idea, I say “yes”, but I contend that the products we have at present are simple enough.

How much more simplistic than life insurance can you get?

The fixation seems to be around the complexity underlying some protection products – serious illness cover, for example covers 161 conditions and critical illness contracts offer protection for dozens of diseases; surely this means they are too difficult for Joe Public to understand?

While stripping elements from products will undoubtedly make them easier to grasp and might result in a lower premium (although how much lower is a separate debate), it is not really what the industry needs.

Take cars as an analogy; I want to get the most value for my money and if that means the manufacturer using technological advancements and smarter designs to keep prices low then great.

What I do not want is for the seatbelts and airbags to be removed and the brakes compromised in order to make the product “simple”.

Removing component parts of a protection policy will result in weaker cover for the client.

The reason some elements of our plans are complex is that the issues they aim to protect against are equally multi-faceted; cancer is not a simple disease, it ranges vastly in its severity, aggressiveness and in the likely outcomes for the sufferer.

Our products need to be designed to deal with this complexity – not to shy away from it for fear of being confusing.

It is certainly true that customers can be bamboozled at point of purchase but this is not a problem unique to protection, virtually every purchase one makes can be confusing without appropriate guidance – be that online, in store or independently.

I remain convinced that intermediaries are the key to decent, appropriate protection sales.

Giving them the training, sales and marketing support to distribute our products is far more important than designing inadequate, cut price contracts in the hope that simplicity equals sales.

PPI serves as a lesson that this thinking is not always sensible.

In any case, the simplest products do not always become the best sellers; by far the most basic protection product is whole of life cover and this represents a small proportion of annual sales.

That our policyholders understand their cover is crucial, that they are conversant with every facet at point of sale is not.

To return to my earlier analogy I do not need to know how leverage, friction and hydraulics combine to make the brakes of my car work, I just need to know that they will stop me when I push the pedal.

Phil Jeynes is head of account development at PruProtect.

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