There are three things in this world that truly terrify me.
One is that scene in The Shining, where Jack Nicholson’s wife discovers he’s been typing the same sentence over and over again.
The second is drivers who overtake while I am cycling and then suddenly turn left in front of me, and the third is banks giving financial advice.
As a result, I do not watch The Shining any more, never trust drivers and – actually, I am not quite sure what to do about the banks. They just do not seem to ever learn their lesson.
They had a sales boom in the 1980s, followed by rampant mis-selling, multi-million pound settlements and then a crackdown.
Then, in the early part of this century they went back to flogging investments through in-house advisers who were set a mass of ambitious sales targets. And of course they faced major mis-selling claims, and so reined it all back in.
We are now at the start again. A report in the Financial Times says many of the big high street names are on the brink of bringing back advisers into their branches.
The change in the regulatory environment in 2012 made it too costly for banks to provide independent advice to all but the very richest customers. It proved a boom for St James’s Place and Hargreaves Lansdown.
Santander, Lloyds and RBS are all finding ways to make it work. Presumably some bright spark looked at Hargreaves’ share price (up 200 per cent since 2013) and twigged this was a slice of the action they wanted.
Much of this change of heart must be driven by changes in consumer behaviour. Two branches a day are currently being killed off, and although that rate is slowing, there is greater pressure than ever to make them more profitable – and that means more sales. The trouble is the lack of independence.
For most normal savers advice should always be independent. Explaining to them that someone has a limited range of choices, or can only recommend a certain type of product is largely meaningless. With a bank it is even worse. The range of investments is often so narrow as to be dangerous.
Banks are also marketing zealots. Not only do they tie themselves up in knots with compliance, but they are masters of coming up with new ‘clever’ terms to sell products that are far from transparent.
Words that fill my heart with particular dread are ‘guaranteed’, ‘low-risk’, ‘protected’, and so on.
What they really mean is some kind of structured product that is far too complicated to explain in normal language. You simply cannot trust a bank to give good advice. The short-term interests of shareholders and targets always get in the way of doing the right thing.