Consuming Issues: Don't ask a bank for advice

Of the seismic events in my lifetime, including the fall of the Berlin Wall, the death of Princess Diana and the attack on the Twin Towers, none has surprised me more than the banking collapse.

Ten years ago, Lloyds, NatWest and RBS were sturdy institutions with reputations as solid as their granite buildings. For them to have bet and lost so catastrophically on the roulette wheel of global finance and plunged towards bankruptcy was something I could never have imagined.

Their losses will reverberate around our lives for at least a decade. At the end of last year, the National Audit Office put the cost of bailing out the banks at £850bn, but it will probably pass £1trillion, or £40,000 for each of the UK's 25 million households.

While this financial collapse has been picked over endlessly in the media, less attention has been paid to the banks' accompanying and contributory moral collapse, which affects individual customers every bit as profoundly as its public manifestation affects taxpayers. Banks have been become greedy and untrustworthy.

Until the 1990s, clearing banks were boringly reliable – they received small sums for taking in pay and savings, administering current accounts and advancing loans and mortgages. Now they have sacked the managers who carefully oversaw these arrangements and installed in their place incentivised salespeople.

As a result, banking, admittedly never a philanthropic exercise, has become entirely and maniacally devoted to squeezing every last drop of profit from customers. Witness the penalty fees on current accounts, rapidly escalating margins on credit and store cards and the scandal of jacked-up payment protection insurance on loans, plastic and mortgages.

Another sideline has been funnelling account-holders' cash into investment schemes that pay the banks handsome, arguably excessive levels of commission that can eat up contributions for the entire first year of the scheme.

Latest research from Which? exposes this scandal and shows that you simply cannot trust what the suited bankers tell you in return for keeping their jobs. Researchers aged over 55 went to branches of eight leading banks and building societies, posing as retired people with more than £50,000 to invest.

Staff who advised these "customers" breached rules on giving investment advice and, in the words of Which?, "recommended complex and potentially unsuitable products without explaining how they work or the risks". Amazingly, in 14 of 27 visits, they failed to point out that savings of more than £50,000 were not guaranteed by the state-funded Financial Services Compensation Scheme if a bank went bust (perish the thought). Of the 20 visits to banks, only twice was wholly accurate advice given, once at NatWest and once at HSBC.

None of the 11 advisers at Santander branches of Alliance & Leicester, Abbey, and Bradford & Bingley passed the undercover test. Other failures were Barclays and the publicly-owned Lloyds and Halifax. Building societies fared a little better. None of the three elderly visitors to Britannia received perfect advice, but that was the outcome of half the visits to the Nationwide.

"If you have money to invest, it makes sense to go to an independent adviser, who can search the whole market, find the best deals available and recommend something suitable," says Rebecca Fearnley, of Which? Money.

My advice? Switch your current account to the Nationwide, and don't be old and vulnerable when you visit your bank.

Heroes and villains

Hero: Virgin Atlantic

One argument used by striking British Airways cabin crew is that they will not be able to deliver a premium service if salaries fall from their current average of £29,000. BA's competitors, however, pay stewards far less. Cabin crew at Virgin Atlantic, left, earn £13,500 – yet even a cynical friend of mine had to admit that Virgin's service on both legs of a recent economy flight to Los Angeles was far better than anything experienced on BA. Sometimes teamwork, motivation and professionalism count for more than money. Unless BA staff are paid less and perform better, they may not have jobs at all.

Villain: Alistair Darling

The Chancellor tried to pick a prudent course through the recessionary rubble, but his Budget attack on pubs was a mistake. He raised beer duty by 5 per cent and plans to increase it above inflation for the next three years. While drinkers and smokers cannot expect much leniency during a financial meltdown, the Government is oddly ambivalent about pubs. On the one hand, it trots out the "Pubs Minister", John Healey, to enthuse about their importance to communities, and on the other clobbers landlords with big tax rises. No wonder Britain's pubs are closing for good at a record rate of six a day.

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