Investment brokers fail to get the basics right

A Which? investigation reveals that some investment brokers are failing to provide full and accurate information about the products and services they sell, which could hinder ‘DIY’ investors from making the right decisions for their needs.

We tested 11 different investment brokers on their knowledge of the products and services they sell, asking common questions around funds, charges and tax.

We found:

  • Specialist investment brokers Fidelity, Hargreaves Lansdown, Bestinvest and Interactive Investor came top with their in-depth expertise.
  • HSBC and Halifax scored the least, suggesting we seek answers online on a total of 14 occasions
  • All providers scored badly on the tax rules around stocks and shares ISAs, with Alliance Trust Savings incorrectly suggesting that these products are ‘tax free’ in every call.
  • Some brokers were better at explaining that dividend income is still taxed at source in ISAs, but not one company mentioned the significant tax advantages of holding corporate bonds and gilts in tax-efficient wrappers, such as ISAs.
  • HSBC was the worst performer for information on the charges for investing, while Hargreaves Lansdown and Fidelity Personal scored the highest.
  • Staff fell down when asked to explain the difference between actively managed and passive funds, with HSBC and Halifax faring the worst.
  • Staff also failed to explain fund terms like ‘inc’ and ‘acc’, short for ‘income’ and ‘accumulation’ units, with Halifax faring the worst.

 Gareth Shaw, Which? money expert said:

“It’s unacceptable that some brokers are failing to get even the basics right, and that phone staff are telling people to search for answers online. Our findings suggest investors risk making important investment decisions based on the wrong information.

“With DIY investing becoming increasingly popular we expect to see all of the biggest names in the business demonstrating a good level of knowledge on the products and services they offer.”

Notes to editors:

1. Full table of results:

investment brokers2

2. Investment brokers don’t offer personal advice, but as providers of ‘execution-only’ services they are permitted to provide information in response to these kinds of questions from would-be investors.

3. For a copy of the full article please contact Luisa Diaz on 0207 770 7805 or via email luisa.diaz@which.co.uk

4. Methodology: Our researchers asked five questions that investors might be expected to ask while researching their investment options. They made 12 calls to each broker, asking about the costs of investing, active and passive investment, income and accumulation units, fund pricing and stocks and shares Isa tax benefits. Each question had different numbers of points available, plus a discretionary bonus point for excellence. Our questions were designed to be testing, so we weren’t expecting perfect scores.

Scores are based on calls made during August and September 2014. Maximum points available: Cost of investing = 4 per call; Active and passive funds = 4 per call; fund prices = 3 per call; ‘inc’ vs ‘acc’ units = 4 per call; Isas and tax = 5 per call. We made 12 calls per provider. We were unable to proceed with our mystery shop of a 12th broker, Charles Stanley Direct, as several of our initial calls were answered by the same representative

Press Release: , , ,