Eps 1: The FINANCIAL ADVICE Mystery Revealed
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Cody Olson
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A 20-page regulatory report entitled "Assessing the Quality of Investment Recommendations in the Retail Banking Industry" found that in 15% of the survey data, the consultant did not collect enough information to ensure that his recommendations were appropriate. In another 11% of mystery customer cases, data showed that consultants provided inappropriate advice. Three regulators-the Ontario Securities Commission, the Association of Mutual Fund Dealers, and the Canadian Investment Industry Regulatory Organization-sent out mystery shopper to investigate whether financial advisers prioritize clients.
The Mystery Store Regulators Reveal Conflicting Investment Advice Advice An investigation by three Canadian regulators to assess clients' experience with investment advisors has no apparent negligence. You can update your browser if you find conflicting advice from investment advisors in the Mystery Shop from regulators. Return to video
The first example that I could find is Santander UK which was fined in 2014 for “widespread deficiencies in investment advice” for £ 12.4 million after a mystery shopping was done a year earlier. Financial services regulators sent people to check on how investment advice in Ontario is being offered.
Moreover, only 21 of those visits made product-specific recommendations. Three regulators concluded that there were no examples of serious misconduct between consultants and that advice was appropriate in 86 percent of stores where the consultant gave direct advice. But he said that the number and variety of advisor stocks encountered by his buyers was confusing.
Mystery shoppers visited four types of financial advisors: investment traders, mutual fund traders, portfolio managers and exempt market traders, a kind of specialized advisor dealing with products such as limited partnerships, private stocks and trusts, and real estate. Instead, 36 percent of the consultants gave general advice and about a third did not give any advice because buyers did not have the money to invest. Only 52 percent of consultants discussed the risk-reward ratio with buyers, properly alerting them to the risk of each investment.
In addition, 71% of stores that submitted recommendations met the Know Your Customer, Know Your Product and Eligibility requirements, 71% discussed the product pricing and 63% met all requirements. Only 32% of stores received customer information from customers. According to The Telegraph, the Mystery Shopper report found that one in ten customers received poor advice on how to best use basic banking services such as pensions and investment plans.
For example, the Monetary Authority of Singapore just published the results of its third mystery shopping attempt for the financial advisory sector, the first study of its kind conducted by Canadian securities regulators. A recent Investment Executive article highlights the results of a "mystery shopping" in which investment advisors were secretly inspected in 2014 by three securities regulators .
The Financial Services Authority conducted a "mystery shopping" in which it was revealed that a large bank was giving bad financial advice to its clients. The most recent mystery shopping case I was able to spot concerned retail and mainstream bank accounts in 2020, where referral and identification failings were discovered, as well as a lack of specialized services for vulnerable customers.