Jersey FSC Conducts 'Mystery Shopping' Exercise
Tuesday, February 08, 2011

The Jersey Financial Services Commission has published the findings of a mystery shopping exercise on the suitability of advice and sales process provided by regulated investment advisers in the island during 2010. This is the second such exercise carried out by the Commission.

John Harris, Director General of the Commission, said: “In July 2008, the Commission issued revised Codes of Practice for Investment Business and we decided to repeat the mystery shopping exercise to see how the Codes are being followed in practice and whether lessons had been learned from the previous mystery shopping exercise.”

The mystery shopping exercise was conducted on behalf of the Commission by Deloitte LLP and GfK Mystery Shopping, who recruited individuals to undertake the mystery shopping fieldwork.

The report covers a programme of mystery shopping which was based on two scenarios. These scenarios were for a potential investment of a lump sum of GBP120,000 or for a ‘health check’ of the mystery shopper’s current financial position including existing financial products. The Commission received 17 mystery shopping reports which were analysed against regulatory benchmarks.

In summing up the findings, Harris said:

“It was pleasing to see that there had been a marked improvement in the number of firms sending out suitability letters and providing clear and customer-friendly sales literature compared to the mystery shopping exercise undertaken in 2007”.

“However, there are still some areas for improvement in the advice process, in particular, transparency regarding fees, charges and commissions, comprehensively assessing the customer’s complete financial position and risk profile. The focus of the meetings should be to independently assess the customer’s financial position and provide recommendations based on their needs, not on the selling of products.”

The report does not name those firms involved in the exercise. However, the Commission has provided detailed feedback to each firm sampled.