No IFAs or independent mortgage brokers were included in the survey by the Consumers Association for Which? that accuses the financial services industry of being “rife with poor advice and questionable sales tactics”.
The year-long undercover investigation, the results of which were published last week, limited its research to 39 banks, building societies and estate agents.
Researchers posing as first-time buyers to test the advice given on insurance products sold with a mortgage concluded: “The advice was misleading and lacking in care. It would have resulted in people being under or over-insured, or buying unnecessary products that stretched their budget to the limit.”
It says companies earn fat commissions for selling protection including life cover, critical illness and income protection to buyers. Which? says these policies are expensive and complicated.
It found that some advisers resorted to cynical tactics to sell policies. An adviser from Halifax estate agents told a researcher his cousin had just developed breast cancer.
From next January, the FSA will police this type of advice but the CA's investigation shows firms have a long way to go to comply with regulations.
Malcolm Coles, editor of Which?, says: “There are serious problems with the way advisers work. It's appalling to use scare tactics that could dupe people into spending hundreds of pounds each year on cover they don't need.”
M2 Financial IFA Stuart Johnstone says: “Part of the problem is to do with people going to banks or building societies where advisers earn commission to sell their own products, rather than a good IFA who would offer the client the option of paying a fee rather than involving commission.”