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FSA Mystery Shopping

FSA Mystery Shopping. The findings – February 2013. Sample. 231 Mystery shops across six major firms in retail banking sector 75% of customers received good advice FSA will follow up to ensure firms have acted upon these findings. Two key questions .

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FSA Mystery Shopping

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  1. FSA Mystery Shopping The findings – February 2013

  2. Sample • 231 Mystery shops across six major firms in retail banking sector • 75% of customers received good advice • FSA will follow up to ensure firms have acted upon these findings

  3. Two key questions • How could we have picked these examples ourselves? • What specific actions do we need to do to address the findings and prevent them happening in future? • Issues around policy and process design (include customer user testing) • Training and assessments of competence • Effectiveness of supervision and monitoring • Culture • Remuneration and rewards

  4. What was found -1 • The firms risk profiling tool contained a complex question that assumed customers had a particular level of financial knowledge and mathematical ability • Advisers failed to check the customer understood the question • The adviser didn’t check the customers understanding of the risk category they had chosen • The adviser recommended a fund to match the risk profile without checking with the customer whether this was correct

  5. What was found -2 • The middle risk category did not indicate the extent of potential losses • Failing to give sufficient information to customers to help them understand the level of risk involved • Advisers over reliant on risk profiling tools and failed to check whether the customers risk profiles has been assessed correctly • Advisers failed to consider the customer’s ability to cope with financial losses

  6. What was found -3 • The adviser accepted the category selected by the customer without any further explanation or discussion • Discrepancies between the risk profiling tools and other customer information • One adviser failed to gather enough information on the customer’s income, current and future tax status, existing assets and regular financial commitments • The adviser failed to recommend that the customer repay his credit card debt

  7. What was found -4 • Advisers carried out fact finding in a rushed and unstructured way • Failed to ask appropriate follow up questions • Collected the necessary information but failed to take it into consideration • Mismatch between suitability of recommended product and the length of time the customer wanted to invest • Adviser making contradictory statements over suitable timescales for product investments

  8. What was found -5 • Advisers recommending investment products over non investment products • Some advisers recommendations contradict firms own advice guidelines • Risks emerging from sales targets and performance management

  9. What was found -6 • Advisers failed to give customers the required initial disclosure on the firm, its services and remuneration • Failed to explain disadvantages of recommendation • Misleading statements about how the product was managed and gave no risk warnings • Interest rate sales aids did not reflect the actual returns available and therefore undervalued cash deposits

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