It is common knowledge that Spanish banks resort to underhand tactics to squeeze as much as possible out of their long-suffering customers in the form of commissions and exorbitant charges of all kinds. But the pressure that some banks are putting on their customers to prevent them from investing in external funds (from other management companies) where the fees for the bank are lower is reaching levels of mafia-style extortion that are entirely reprehensible.
Below, we will look at some real-life examples of the practices being carried out by an institution such as Banco de Sabadell (despite the fact that it uses images of people of integrity in its advertising). And we know for a fact that other institutions are equally guilty of such despicable and unethical behaviour.
Let’s first clarify exactly what we’re talking about. To put you in the picture, the examples we’re about to give you involve BSabadell customers who have previously made it clear, repeatedly and explicitly, to their contacts at the bank that they do not wish to receive investment advice. In other words, these customers have repeatedly made it clear that they are declining the bank’s “free advisory” service and wish to use only its operational and custody services.
They have expressly waived the bank’s discretionary management of their portfolios and have declined to sign any management mandate. However, the regulators—who act as guardians of the banking sector’s interests—ignore this fundamental right of the user and assume that they will use this service, for which they are required to comply with MiFID regulations; but that is another aberration which we have already discussed in previous articles.
As we mentioned, some customers have decided to do without banking advice because they have (or believe they have) sufficient knowledge to make their own decisions, whilst others have simply chosen to rely on their own independent advisers, whom they do trust.
Whatever the reason, all of them have clearly informed their bank—in this case, Banco de Sabadell—that they do not wish to receive advice—if one can call what the banks get up to that—but rather that these customers simply wish to make use of the bank’s intermediary services or buying and selling services, and for the deposit or safekeeping of assets. Needless to say, the bank religiously charges the corresponding fees for these tasks, as is only to be expected.
Therefore, in this client-bank relationship, the subscription to an external fund (other than a BSabadell fund) requested by the client should not pose any greater difficulty than simply requesting and signing the relevant documentation between both parties so that the investment can be made legally and efficiently. But no.
As most of you will already know, banks make more money by selling their own products and investment funds. However, they also receive a share of the management fees from the third-party funds they market, and these fees are negotiated by each bank with each of the external fund managers.
In some cases, you will be able to negotiate higher percentages, whilst in others you will secure only a fraction of the management fees for those funds. And depending on the profits these fees generate for the bank, the institution draws up lists of “preferred sales”, ‘non-preferred sales’ and ‘prohibited sales’, that is to say, funds that the bank flatly refuses to subscribe to, using excuses (true or otherwise) of minimum volumes or platform incompatibility. This final category of ‘prohibited’ funds includes those investments for which the bank has failed to negotiate any management fee rebates, but for which it would still charge the corresponding buying and selling fees and/or deposit fees. But as that does not seem sufficient to them, they directly veto such funds in order to divert clients towards their own fund sales catalogues, or failing that, towards third-party funds that do generate those management fees in addition to the trading and custody fees.
But what happens when a customer asks to invest in a fund managed by a firm that pays lower fees to Banco de Sabadell? That is where the pressure tactics begin, designed to intimidate the customer into changing their mind and buying whatever is most profitable for the bank. As you will see below, BSabadell requires its customers to sign documents that are clearly unfair. And they insist time and again on presenting the investment decisions made by their customers as practically insane choices that will lead them to ruin.
The bank blatantly lies to the customer by telling them that these products do not match their risk profile at all and are completely unsuitable for them. They do so vehemently and without the slightest hint of shame or ethical qualms. All for the money, unfortunately.
In the real-life cases we present below, we can assure you that these decisions made by clients not only fit perfectly with the profile and needs of their respective families, but also that the quality, risk/return ratio and long-term returns are superior to any of the alternative external options offered by BSabadell, and infinitely superior to the bank’s own funds and products. Read these documents and decide for yourselves whether or not they constitute outright extortion, and an abuse of power and trust, designed to sell the bank’s own products more effectively.
Here is a literal translation (from Catalan) of one of these documents that Banco Sabadell requires you to sign, without correcting the errors in the original wording. Below you will find other original documents of a similar nature that are required for subscriptions:
“Banc Sabadell wishes to inform you that the transaction under review is not suitable for you, and the bank’s recommendation is that you do not proceed with it. The bank has reviewed this transaction solely because you requested it. The bank would never have recommended it on its own initiative, as the financial advisory service it provides requires it to offer you only recommendations that are suitable for your investment objectives, financial situation, and knowledge and experience, and this transaction does not meet these criteria.”.
Ladies and gentlemen,
I am writing to request, on my own initiative, that you invest in the FI RENTA FIJA INTERNACIONAL product “xxxxxxxx”, which is part of the INVESTMENT FUNDS range, in full awareness that the risk associated with this product exceeds the risk profile indicated by the suitability test.
Yours sincerely,”
(Note that this same confusing document attempts to include both the bank’s warning and, in the very next paragraph, the customer’s signed request…)
You can read it here another Machiavellian original document in which BSabadell has required its customer to add the following sentence in their own handwriting: “I am aware that the fund does not have a daily valuation”In other words, a repetition of what the document itself warns against in point 5 by default, without even specifically referring to the fund in question. You can also read the absurd references and malicious warnings about products and regulations for US investors, which have nothing to do with the investment requested by the client, threats of losing the entire investment, warnings about the payment of various unspecified fees, and so on. I recommend that you read the entire document (just one page) and judge for yourselves whether it is appropriate to impose this requirement when investing in one of the world’s best funds from fixed incomeemerging corporate sector.
Let us not forget that such extortion and pressure to prevent customers from investing in products that generate little profit for the bank has been taking place even when the funds requested by customers are perfectly suited to their profiles (in one case, the external fund requested was none other than Carmignac Securité, (to name but one). Not to mention their superior quality, risk-return ratio and long-term returns compared with any of the alternative external or internal options offered by Banco de Sabadell or by other institutions with a similarly lack of ethics.
Not everything goes when it comes to making more money, Bank Sabadell executives. You are intimidating customers with no financial knowledge into signing risk acknowledgements in their own handwriting on convoluted and underhand documents that bear no relation whatsoever to the investment they have requested. And the sole aim you are pursuing is, obviously, to keep your customers captive within your own products. In short, to prevent your customers from investing in funds where your bank earns less and they earn more. This practice that you carry out systematically, gentlemen of BS, and which generates such good financial results for you, is despicable and immoral. “Banc Sabadell: The Values that Guide Us“: You couldn’t have chosen an advertising slogan that was more at odds with what you actually do.