MIS-SELLING - What is it?
Nearly all financial products sold in the UK are regulated or subject to a complaint handling scheme. These rules and complaints schemes can date back to 1988 when the UK Financial Services Act came into force. This means that there are rules and regulations governing how products are advertised, sold and administered once we have purchased them. The rules are there to ensure that we are not sold a product that is unsuitable for our needs.
Even the largest and most reputable of banks and financial institutions can be guilty of not following the rules as closely as they should when selling us their products. Sometimes these rules can be wrongly implemented, forgotten or just plain ignored. Whatever the reason, if the rules were not followed properly or something unfair happened, you can make a claim for being treated unfairly and ask for your money back with interest.
Maybe the adviser was under pressure?
Maybe the adviser was being incentivised?
Advisers can sometimes be under pressure to cope with busy schedules, high caseloads and tight deadlines. This means that they may have to cut corners or spend less time than they would really like to properly understand the needs of their clients. In circumstances like this, sometimes the rules are either inadvertently or deliberately ignored.
Advisers can sometimes be incentivised to sell certain products and hit sales targets. This may mean that the need to ensure a product is suitable for a client becomes secondary to actually selling the product to hit targets and earn bonuses. In these circumstances, clients can receive products which may not be properly suitable.
Maybe the adviser was a Representative?
Maybe the adviser did not give Advice?
If you were sold a financial product by a broker or financial adviser instead of purchasing directly from a bank or building society, the adviser could have been a representative of another firm. This means that another firm may have been responsible for the compliance of the sale leaving the adviser that sold you the product with no direct responsibility.
In these circumstances, the adviser selling the product may have been tempted to not follow the rules as carefully as they should, safe in the knowledge that they would personally never have to deal with any problems caused by bad advice.
How can an adviser not give advice??
The rules in place allowed advisers to work with a two tier system. This system had "Advised" and "Non-Advised" sales.
If a sale was advised, it was the adviser's responsibility to ensure that the product provided was suitable, affordable and all features were properly explained.
If a sale was non-advised, all the adviser had to do was to ensure that the client was provided with enough information to make their own decision.
There was a high potential for clients to purchase unsuitable products if the information provided was ambiguous or unclear or just not even provided at all.