Jeff Salway: Be thankful banks won’t advise you

Have your say

GOING to a high-street bank for investment advice is like asking George Osborne for help with your finances. You’d be wise not to, in other words.

For the average investor, however, the days of seeking investment advice from the local bank branch are over. Most high-street banks have restricted their investment advice services to their most affluent customers or shut them altogether, citing increased regulatory costs.

While that leaves millions of normal investors without access to advice, the reality is that in many cases no advice is better than the misleading and often dangerous help offered on the high street.

Between them, the UK’s five largest banks received 1.7 million complaints in the last six months of 2012 alone, with payment protection insurance (PPI) accounting for more than half, according to the Financial Conduct Authority (FCA).

The biggest culprit was Santander, which recently shut down its advice arm amid a regulatory investigation into the quality of advice it offered.

The Spanish-owned bank upheld more than six in ten investment complaints in favour of the customer. A similar proportion were upheld at Bank of Scotland, while Lloyds and Barclays found around four in ten in favour of the customer.

Many investment complaints will have concerned the “structured products” that high-street banks are so keen on flogging. These plans claim to give investors the best of both worlds: growth with a “guarantee” of capital protection. The problem is they’re often so complex that even advisers don’t understand how they work.

Thousands of cautious investors have been mis-sold structured products, typically elderly customers with modest savings.

It has now emerged that Lloyds Banking Group is looking into structured product sales by Scottish Widows, after a review found one in four cases may have been mis-sold.

If you want to understand why trust in financial services has been eroded so badly, investment mis-selling by high-street banks encapsulates it nicely. It’s driven by branch sales targets set by those higher up the hierarchy who know they will walk away with huge bonuses as a reward for screwing their customers.

Customers have been ripped off with impunity – only many won’t realise it until their contracts mature and they’re left with irrecoverable losses.

Millions of people are left without access to investment advice by the decision of the banks to walk away. Judging by their somewhat loose interpretation of the meaning of advice, that may not be a bad thing.

Move your money to beat the teasers

WHILE we’re on the topic of banks letting their customers down, one point raised in the main piece on this page is the presence of “teaser” rates in the top savings accounts. These are the one-year bonuses used to lure people into cash Isas and other products. Typically they disappear after a year, slashing the interest to just 0.5 per cent or so.

Banks know all too well that few people will move their money as soon as that happens, making it a very cheap way to attract deposits.

The FCA last week hinted that it may finally take action against this sneaky practice, one that further undermines confidence in savings.

While the chances of a ban on teaser rates are very slim, the regulator must force banks to make it far clearer to customers exactly when their savings account loses the bonus element and what their new rate is.

In the meantime, if you took out a savings deal a year ago, don’t let them get away with it: be vigilant and move your money as soon your interest rate falls.