Legislator has obliged banks to document customer talks

The legislator has obliged banks to document customer talks in so-called advisory protocols. Among other things, consumers should be protected against wrong advice. As is so often the case with banking and financial reforms, the opposite is true: customer service is no better than it used to be – banks use advisory protocols to minimize their own liability risks.

The Legal had examined banks in August 2010 and carried out a nationwide test. This resulted in 61 advisory minutes that were evaluated by the Consumer Centers and the Verbraucherzentrale Bundesverband. The result: the benefit of the protocols for bank customers tends towards zero.

The investment objectives were not documented

In 59 of the 61 protocols, the investment objectives were not documented. In just 59 out of 61 cases, the consultants failed to grasp the client’s experience with financial transactions. In 58 cases, the product recommendation issued by the consultant was sufficiently justified. In no single advisory protocol did the banks provide meaningful explanations of the commissions they receive to broker an investment product. Also in no single protocol was there any indication that the bank adviser had checked the customer’s options to see if he was able to cope financially with the desired risk.

Banks were significantly more ambitious

The banks were significantly more ambitious in the effort to eliminate their own liability risk. According to the consumer advocates, in 49 out of 61 advisory bills that the client had to sign after the meeting, a clause was found that would exempt investors from any liability.

Consumer advocates are now calling on the legislator to set a uniform standard for the protocols. However, the consumer advocates may expect too much from it. Banks could use standardized documentation to secure their indemnity against all conceivable instances.

Just how easy this is is shown by a real example from everyday consulting: The customer confirms with his signature that he has been informed about all risks. The Bank validates this statement by also confirming the issue of a sales prospectus. Of this alone, the customer is not better informed. However, the bank is fully secured because, in case of doubt, it can provide tangible proof of the customer’s explanation.

The consumer advocate is to demand from the legislator changes

Part of the task of the consumer advocate is to demand from the legislator changes that should better serve the customer. However, in the recent past (eg in the case of the Consumer Credit Directive), it has become apparent that the hoped-for effect of a legislative change in the financial sector can easily turn into the opposite. Consumers should therefore obtain information themselves and obtain advice on important decisions from an independent consultant (for a fee).