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The Jersey Financial Services Commission (the ”Commission”) today published the findings of mystery shopping research conducted into the suitability of advice provided by regulated investment advisers.

John Harris, Director General of the Commission, said,

“The Commission already conducts regular examinations of regulated businesses but we wanted to supplement this work with mystery shopping.  This technique is valuable to regulators because it provides an insight into the verbal delivery of investment advice which is difficult to assess as part of an ordinary examination.”

The mystery shopping research was conducted on behalf of the Commission’s Investment Business division by Deloitte & Touche LLP, supported by GfK Mystery Shopping.

Mystery shoppers approached 13 local investment advisers seeking advice in relation to a lump sum investment of either £8,000 or £100,000.  The appointments with each investment adviser were recorded and the advice was analysed against regulatory benchmarks.

In summing up the findings, Mr Harris said,

“Overall, the advice provided was appropriate and it was particularly gratifying that some advisers recommended that the money be used to reduce existing debt.  This was sound and impartial advice which would not have benefited the adviser financially.”

“The report has also highlighted some areas for improvement.  In particular, advisers must ensure that they establish the full extent of a client’s existing debts.  We would also expect that the adviser’s recommendations, along with full product details, (sometimes referred to as a “reasons why letter”) are set out in writing to the client prior to an investment being made.  We will be issuing additional guidance to the industry in this regard.”

Another finding highlighted in the report was that a number of those shoppers seeking to invest £8,000 had difficulty in obtaining advice.  Mr Harris noted,

“We were a little surprised at the difficulty that some of those with £8,000 to invest had in obtaining advice.  We accept that such an amount will generate a limited amount of commission for an adviser, but it is a good deal of money all the same.  One cannot generalise from a sample of this size, however it is important that individuals can gain access to professional investment advice and we will therefore be considering this finding in more detail.”

The report does not name those firms involved in the research however, the Commission will be providing specific feedback to each firm sampled.

A copy of the report is available on the Commission’s website by clicking here.

- Ends -

For further information please contact: -

David Banks
Director, Securities
Jersey Financial Services Commission

Tel: + 44 (0) 1534 822048
Fax: + 44 (0) 1534 822001

Notes to Editors.

  1. The Market Research Society (MRS) defines mystery shopping or ‘mystery customer research’ as: ‘The use of individuals trained to experience and measure any customer service process, by acting as potential customers and in some way reporting back on their experience in a detailed and objective way.’
  2. GfK Mystery Shopping is an independent market research company who have performed similar work for the UK’s Financial Services Authority.

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