Monday night’s Panorama program looked at whether the consumer can trust their bank. In particular it focused on the quality of financial advice offered by some of the major high street banks.
Mystery shoppers looking to invest a lump sum of money were sent in to a range of banks; the results were mixed to say the least.
Some banks such as the Co-Operative were praised by the program; others however did not fare so well. A number of advisers came in for particular criticism especially when assessing a customer’s attitude to risk and explaining charges. Others were accused of putting undue pressure on the customers.
The full program can be viewed again on the BBC website , we did just that and then turned our thoughts to a few lessons we believe can be learned from the program.
Spend time finding an adviser
Many of the people on the program believed that because the bank was well known, and in many cases they were long standing customers, they could automatically trust their bank.
When looking for an adviser we would always recommend that you talk to more than one, before making a final decision.
The relationship between client and adviser should be a collaboration on your behalf to help you achieve your financial goals. The relationship could last for many years and you will often be talking to them about the most intimate parts of your life, not only do you need to trust your adviser, you need to get on with them too!
Take time to look around for an adviser you feel comfortable with, seek recommendations and ask for testimonials. This isn’t a fool proof approach but it does improve the chances of finding that long term partner who will help you meet your financial goals.
Use an independent adviser
Now we would say that wouldn’t we? We are IFAs.
However, we passionately believe in the benefits of independent advice. That is after all what most people are looking for, independent advice and not just to be sold a product from one company’s range.
There are many ways of finding an IFA, recommendation can an excellent method and you may well end up in a bank as many do offer independent advice.
Wherever you end up we believe that you need both independence and advice.
Homework
Of course you go to see an adviser for advice, if you could do it yourself you probably would but it pays to do a little of your own research.
Take another example of a major purchase, buying a house. You will probably be interested in the quality of the local schools, shops, amenities, even the local pub. Do you take the estate agents word for it that these are all great or do you do some of your own research? Of course you do, you look at the recent Ofsted reports, you visit the shops, you might even pop for a pint but you take a look yourself.
It’s no different with financial planning; the internet gives easy access to so much information these days. Whilst you may still want guidance and ultimately advice, it can often pay to have some background knowledge before you see an adviser.
Think about risk
When the word ‘risk’ is mentioned in relation to investments most people’s thoughts immediately turn to stock market crashes and losing money. The type of investment you choose dictates how much risk you are taking with your investment; it doesn’t take a genius to work out that an investment into the shares of a Russian Mining Company is more risky that a simple deposit account from a UK bank.
Remember though that there are other types of risks too.
Inflation for example is a major risk at the moment. If the return you get is below the level of inflation then the buying power of your savings will reduce.
Avoiding one risk, such as your money falling in value, could introduce another risk. For example the capital security offered by a deposit account can mean that your savings don’t keep pace with inflation.
Take time to consider all types of risk and work with an adviser who understands and can explain them to you.
Charges
Charges can have a big impact on the return you get from any investment. That doesn’t mean you won’t pay them though, every investment has a charge, the important thing though is to make sure that they are fair and that you understand them.
If you don’t understand the charges or they are not explained to your satisfaction then dig deeper, ask more questions. Ultimately don’t be afraid to walk away or find an alternative adviser if you can’t get a straight answer or you think the charges are excessive.
Don’t allow the adviser to rush you or put pressure on
A good quality adviser will work at your pace; don’t feel pressured into making a decision.
If you want more time to think and read through the paperwork they give you (which can be lengthy) then ask for it.
Be very wary of “sales” and “special offers” if you sign today.
You don’t have to pay a complaints handler to make a complaint
The Panorama program referred to a number of people who made complaints against their bank which were ultimately passed to the Financial Ombudsman Service (FOS).
Whilst the people in the program had their complaints upheld and the banks in question paid compensation, it was also mentioned that “thousands of pounds” was paid in fees to complaints handlers.
Remember, you do not have to pay fees to make a complaint to either the firm who advised you to take out a financial product, or indeed the Ombudsman service; it is free to do this. If you feel you need help with your complaint then compare the costs of a complaints handling service with the advice that an IFA can give you; you may find that the IFA is cheaper.
