BBC exposes "poor" financial advice

The advice given out was "worse than expected"

An undercover BBC investigation has revealed the "poor" standard of financial advice given in a snapshot of the UK's advice market.

BBC Radio 4's Money Box programme secretly recorded interviews with 10 "tied" and eight independent advisers.

And the results have shocked a panel of industry experts and consumer representatives who described the advice given as "poor" and "worse than expected".

Risk assessment

In one case, a financial advisor from Lloyds TSB attempted to mislead the undercover reporter.

The advisor wrongly suggested to the client that he could invest in a corporate bond ISA, without any risk to his original capital.

The product in question carries no such guarantee.

Lloyds TSB said they were "concerned by the findings and will be dealing with them immediately."

The panel included Teresa Fritz of the Consumers' Association; Nick Bamford, Director of IFA Informed Choice, and the chairman of SOFA; and Danby Bloch, Editorial Director of the publisher Tax Briefs.

The panel said few of the advisors had explained risk properly and few had found out enough about the client's finances or goals.

They also found too much jargon used in the conversations, and the panel felt that sometimes the letters sent out after the meetings contradicted the recommendations previously made.

Hard sell

In one case, a tied adviser repeatedly tried to sell the client critical illness insurance, by warning of the risk of heart attacks, stroke and cancer.

The client in question had just explained that his mother had recently died.

I feel myself pushing customers to commit more than they can afford

Anonymous Lloyds TSB financial consultant

One IFA even discouraged the client from paying off his mortgage, saying "if you pay off the mortgage, then that money is gone".

And an advisor from the Halifax Bank attempting to sell "share Isas" told the client:

"You are looking at buying shares half-price, just waiting for the price to go back up, so you could make a killing now, but obviously I cannot give any guarantees."

The Halifax argues that all its adviser's claims about potential stock market gains were "balanced with the potential downside."

Pressure to reach targets

An anonymous Lloyds TSB financial consultant told the programme of the pressure to make sales.

"I get a phone call and am told I must sell a pension - or whatever - by the end of the day."

And he said his basic pay has been cut because of missed sales targets.

"As a consequence I feel myself pushing customers to commit more than they can afford" he said.

And he continued: "My manager tells me I will be moved to another role or a smaller branch if I do not hit targets."

John Spence, the director of branch banking at Lloyds TSB, said " We provide of course some incentivisation on our sellers - they earn more if they sell more, but if they start breaking the rules I'm afraid they wouldn't have a job."

BBC Radio 4's Money Box Investigates was broadcast on Tuesday, 22 April, 2003 at 2000 BST.