89% Mis-selling Complaints Upheld Are Against Tied Financial Advisers

12.00.00am BST (GMT +0100) Wed 6th Aug 2003

New Figures show that 50,436 out of a total of 59,710 complaints in the last two years regarding mis-selling of financial products are made against advisers who are tied to a particular product provider - and 89% of upheld complaints are against these advisers.

The new Government figures obtained by Vince Cable MP, Liberal Democrat Shadow DTI Secretary, highlight the danger of proposals made by the Financial Services Authority to water down the independence of Financial Advisers. The new figures show:

• 89% of all claims upheld are against tied advisers.

• Upheld complaints are consistently a higher percentage of complaints made against tied advisers than IFA's.

• In 2003, complaints upheld against tied agents were 80% higher than in 2002.

• In 2003, 90% of upheld complaints for endowment mortgages were against tied advisers.

• In 2003, 88% of upheld complaints for other investment products were against tied advisers.

Dr. Cable said: "With this level of complaints, it is utter folly for the Government to drive customers into the arms of tied advisers. Some tied advisers are clearly wolves in sheep's clothing."

"Consumers should be extremely alarmed that the Financial Services Authority is insisting on removing the rules which govern the independence of Financial Advisers."

"If the FSA is to go ahead, it is imperative that a network is created providing high quality, independent generic financial advice."

ENDS

SEE NOTES TO EDITORS

MIS-SELLING COMPLAINTS

Source: HC Deb 19 June 2003, 21 July 2003 *Sub = Substantially upheld; **part = Upheld in part

Endowment Total complaints Upheld %age

2002/3 Sub* Part** Total 13570

IFA 359 110 469 1898 24.71%

Tied 3906 854 4760 11672 40.78%

2001/2 Sub Part 14595

IFA 385 95 480 2312 20.76%

Tied 2758 690 3448 12283 28.07%

Total all years 28165

IFA 949 4210 22.54%

Tied 8208 23995 34.26%

Other products

2002/3 Sub Part Total 19159

IFA 411 201 612 3112 19.67%

Tied 3109 1853 4962 16047 30.92%

2001/2 Sub Part 12386

IFA 170 68 238 1952 12.19%

Tied 1142 804 1946 10434 18.65%

Total all years 31545

IFA 850 5064 16.79%

Tied 6908 26481 26.09%

All Products - Upheld

59710

IFA 1799 9274 19.40%

Tied 15116 89% 50436 29.97%

Yearly totals - 2002/3

Total Upheld Total Complaints %age Upheld

IFA 1081 5010 21.58%

Tied 9722 27719 35.07%

Yearly totals - 2001/2

Total Upheld Total Complaints %age Upheld

IFA 718 4264 16.84%

Tied 5394 22717 23.74%

Summary

89% of all claims upheld are against tied advisers.

Upheld complaints are consistently a higher percentage of

complaints made against tied advisers than IFA's.

In 2003, complaints upheld against tied agents were 80% higher

than in 2002.

In 2003, complaints upheld against IFAs were 50% higher

than in 2002.

In 2003, 90% of upheld complaints for endowment mortgages

were against tied advisers.

In 2003, 88% of upheld complaints for other investment products

were against tied advisers.

FURTHER INFORMATION

• The Financial Services Authority has consulted on proposals to remove "Polarisation" rules, which currently insist on Financial Advisers being either totally independent or tied to one product provider. The Liberal Democrats support the polarisation regime in its current format. Genuine independence of Financial Advisers is important for consumers.

• In its Green Paper on Pensions (Simplicity, Security and Choice - Working and Saving For Retirement, issued on 17 December 2002), the Government said:: "producers and distributors (should) develop a market for generic financial advice to help those on moderate incomes to identify their financial priorities and to save where it seems sensible for them to do so".

• In his statement to the House of Commons introducing the Green Paper, the only comment on this topic from the Rt Hon Andrew Smith MP the Secretary of State for Work and Pensions was that:

"To broaden access to advice, we will work with the Financial Services Industry to develop mass-market financial advice in high street banks…"

• This means that consumers will be asked to pay for advice - and they would be getting it from the very people who want to sell them financial products.