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News: Financial advisers in trouble again

A third of financial advisers are breaking City watchdog rules designed to protect consumers, according to a new survey by consumer organisation Which?

In another ‘mystery shopper’ raid some 35% of almost 60 advisers visited failed to provide the Financial Services Authority required documents on costs.

Rules introduced by the FSA last year require all financial advisers to give clients two "Keyfacts" documents on costs and services before giving advice. More than 80% of the ‘tested’ advisers did not explain the purpose of the cost document and around 30% also failed to provide "Keyfacts" on services.

Tied advisers, who mainly work for high street banks and building societies, were the worst - just 16% passed all the standards. Compared to independent advisers they also offer a limited choice of product provider and on some products tend to take more commission.

A Bradford & Bingley adviser selling protection insurance said they were free to choose the product provider, when in fact they are tied to Legal & General. And an adviser at HSBC, again selling protection insurance, said the bank had an agreement with different insurance companies, but that he’d recommend an HSBC policy. This was, in fact, the only income protection policy he could recommend.

While independent financial advisers came out better, they still fell short of the mark; less than half those visited passed all the benchmarks for good advice.

Neil Fowler, editor for Which? magazine said, "Which? has been testing financial advisers for over 20 years and our results have been consistent throughout that time.Our latest investigation leads us to believe that the industry has failed consumers in the provision of this crucial service, and is still failing them."

To get the best advice, Which? recommends avoiding the high street. People should stick with advisers who are fully independent, contacting at least three to try to find one that specialises in the type of financial advice needed.

People looking for financial advice should also consider paying by fees instead of commission and be prepared to negotiate costs with the adviser.

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