Santander UK to re-enter investment advice market

Santander UK is returning to the investment advice market in the latest sign of a more assertive mood in the City just three years after high street banks abandoned the sector under pressure from fines for misselling.

The bank has restarted branch-based investment advice for customers two years after it was hit with one of the biggest ever retail banking penalties for giving unsuitable investment advice to customers in its branches.

The move was disclosed as the financial regulator gave further signs that the frostiness towards banks that marked the post-crisis years is waning.

The Financial Conduct Authority has ditched a study into retail investment advice and incentives to sell products, it has emerged. It has also opted not to take formal action against HSBC over allegations of tax evasion at its Swiss private bank last year.

Most high street banks in the UK stopped providing investment advice three years ago in the wake of a key piece of regulation - the retail distribution review. The rules were designed to help clarify the charges between product sales and advice, but were costly for banks to implement.

Santander plans to have a force of 225 advisers across the country by the end of March. Other major banks are now also considering how to give investment advice to retail customers, including through digital “robo-advisers”.

Santander UK came under the FCA’s scrutiny in 2013, after it found serious failings in the way the bank assessed customers’ risk appetite - leading to the fine.

The watchdog revealed that investment advice provided by retail banks more generally was inadequate in a quarter of all cases. Santander closed down its UK investment advice division, which had 800 employees, in March 2013.

Other banks have also been hit with penalties for retail sales in the past. HSBC was fined 10.5 million pounds (Dh56.80 million) in 2011 for mis-selling investment bonds to elderly clients, while Lloyds was hit with a 28 million pounds penalty for the way its staff were incentivised to sell retail products.

HSBC was alone among big high street banks in continuing to offer financial advice to customers, even smaller investors. It is planning to launch later this year a stand-alone investment service which will allow its customers - also for those with less than 50,000 pounds - to meet an adviser to discuss a specific investment need.

Santander UK hopes that returning to the arena of investment advice will provide additional growth as it attempts to challenge the four biggest UK banks - Lloyds Banking Group, Royal Bank of Scotland, Barclays and HSBC.

Nathan Bostock, chief executive of Santander UK, told the Financial Times that the launch was “another crucial element to establishing relationships with customers”.

The bank’s new team of investment advisers can only recommend Santander’s own products and will cater for customers with more than 50,000 pounds to invest. Advisers will be based in the bank’s largest UK branches, representing about one in four of its 900-strong network.

Santander UK is also launching an online investment platform, which will provide all customers with access to more than 2,000 funds across the market.

Other investment platforms have emerged to fill the advice gap left by the banks. These include self-directed platforms that allow customers to make their own investments, and so-called “robo-advisers”, such as Nutmeg, that ask questions online to create a portfolio for customers. Alan Mathewson, managing director of wealth management at Santander UK, said: “Online investing is likely to represent 25 per cent of the UK investments market over the next couple of years and as a scale challenger, we want to be at the forefront of this trend, providing a simple and convenient way for our customers to access the investment market.”

The FCA’s latest moves follow shortly after it was found to have scrapped a review into British banking culture.

— Financial Times