Changes To Investment Selling – Clearing Up After Scandal

The Financial Services industry has always fought a running battle to ensure that customers are sold products that are right for them.  They have set out strict guidelines about how products can work, what customers should be sold, what records should be kept and what advisors can do in the sales process.


While it’s true that the vast majority of advisors do exactly the right thing and follow the rules to ensure that customers get the products they need, a small minority has taken advantage of their customers to sell products which benefit the advisors more than the investor while others have just lacked the ability to assess their customers’ needs properly.  It’s an issue that has shaken confidence in an industry that needs its clients to be confident, and for some time it has been recognised that stronger measures are needed.

The Financial Services Authority, the organisation with the power of life and death over banks and investment companies, has spent the last few years investigating the way that a number of products have been sold, and they have claimed some very high profile scalps.  The biggest fine ever was levied on a subsidiary of HSBC in 2011, after the company had mis sold investment bonds to dozens of elderly people who were relying on the investment to pay for nursing home fees.

These elderly people are far from being the only victims of such sharp practices, and while many others have made mis-sold investment claims and received compensation, there are still thought to be many more who have gone unidentified and who may never realize they have been victims and are owed investor compensation.  It’s now acknowledged that more could have been done to stop people being sold unsuitable investments in the first place.

Now, the new Financial Conduct Authority, the successor to the FSA whose very name shows it intentions loud and clear, is moving the focus away from investigation, which can obviously only occur after complaints have been received about a product or sales process, to a more proactive approach.  Their intention is to take on the role of the customer and identify problem areas or rogue advisors before they can cause serious problems.  They’ll be talking directly to staff, for example, rather than just reviewing the forms after sales have been made.

They also intend to carry out mystery shopper exercises, after which the recommendations made by the advisors will be examined and assessed to make sure they were appropriate.  Such measures are intended to vastly speed up the process of identifying poor sales practices and identifying new guidelines.  Of course, investigations will still occur when complaints are made, but it is hoped that there won’t be so many of them if more of the issues can be stopped earlier.  That in turn will reduce the number of investment claims, restoring confidence that the industry badly needs and making sure that people get the investments which are the correct ones for their needs.

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Categories: Investing