Jeff Salway: Banks' bad advice has a high price in trust

The problem with abusing someone's trust is that they don't just lose faith in you - others suffer by association.

A BBC documentary on Monday night went undercover on the high street to look at just how the banks are selling so many products to people who don't want or need them. The subject of mis-selling is hardly novel and pops up regularly in these pages, so the BBC told us what we already knew - that much of the advice given on the high street is little better than misleading and inaccurate product selling.

However, the programme's insight into the sales methods used by bank-based financial advisers, and the subsequent loss of consumer trust in the banks, was valuable.

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The reactions of those ripp-ed-off made it clear that the individual bank is not alone in being written off. When trust is lost in these situations it isn't only the trust in the banks, but also in the wider industry, with implications for mutuals and independent financial advisers (IFAs), among others.

In the case of the advice given by banks on the high street, it somehow reflects badly on the whole financial advice sector. Unfortunately the documentary failed to explain that bank advisers can promote only their own or a limited range of products, or point out that anyone wanting proper advice could go to an IFA.

The advice offered on the high street is a long way removed from that offered by the average IFA, yet the boundaries, in the public's mind, are blurred. That's not to claim that IFAs have a squeaky clean reputation, as they don't, but branch-based selling has little in common with truly independent advice.

And the good news is that IFAs are now doing more to distinguish themselves from non-independent advisers. The number of IFAs gaining qualifications beyond minimum requirements is growing rapidly and rules coming into force at the start of 2013 will outlaw the payment of commission by providers to IFAs selling their products. That particular change will have both good and bad consequences, reducing access to independent advice for example, but it tackles the mis-selling issue head on.

After all we've been through in the past three years it's staggering how many people still trust their bank implicitly. In an ideal world, we'd all have confidence in our bank and we wouldn't have that trust abused, but those days are long gone. If you're among the millions to have been mis-sold a product by the bank to which you've been loyal for many years, try not to tar all financial advisers with the same brush, because it could be you that pays the price in the long run.

Sometimes the headline figures don't tell the whole story. Statistics showing that the cost of the average two-year fixed rate mortgage has come down to around 3.5 per cent imply that some homeowners are enjoying the cheapest rates for some time.There's also a five-year fixed rate available at less than 3 per cent now, reflecting improved competition in the mortgage market.

But low advertised rates are not the same as the rates that are being offered. A new Bank of England update reveals a widening margin between the advertised rates and the average rates that borrowers are paying.

The Bank's figures underline that while fixed rates seem very cost-effective right now, few borrowers are benefiting.

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And that means that when interest rates eventually rise, the implications for borrowers, particularly the historically high proportion on variable rates, could be even more severe than expected.