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Fantasy island
As everyone who knows me will attest, I can bore for England on the subject of vintage scooters. I am active in my local and national clubs, in the latter case as the “moderator” for a website where anyone can come on and discuss their hobby.
One of the things I have learned about moderating people’s comments on the internet is that those who do have something to say are rarely representative of the wider group. It is important for me to bear this in mind because if I didn’t I would be driven almost to despair by some of the drivel I read, in this case from IFAs commenting on the impending departure of Hector Sants from his position as FSA chief executive.
I have never met the guy but those who have tell me he is not just brainy in an abstract way but very sharp with it. His previous experience in investment banking means he has a better insight into many of the issues that almost led the UK economy into melt down 18 months or so ago. By all accounts, Sants is highly respected by his staff, politicians and others who have met him (those to whom I have spoken at least).
Yet you would have little idea about any of his if you look at the comments posted on many of the websites where IFAs congregate, after it was announced that he would be leaving in the summer.
On Money Marketing’s website, the overall flavour of reaction was caught by one adviser, who wrote: “GREAT STUFF, hope the rest of the FSA and FOS depart before they devastate the IFA with RDR and give retail distribution to the Banks to destroy.”
Reading this kind of stuff makes me wonder what planet these IFAs live on.
On my planet, which we call Earth, one of the defining features of the financial services landscape over the past 25 years at least has been the near-continuous litany of misselling scandals, ranging from home income plans to endowments, personal pensions to split-capital investment trusts. Billions of pounds have been paid in compensation, inappro priately in some instances but entirely justifiably in most others. On the IFA planet, let’s call it Fantasia, none of this has happened. Or if it has, none of it was the advisers’ fault. Or if some of it was, the solution is certainly not tighter regulation but much looser controls on how the industry operates.
As another response to Sants quitting, put it on the MM website: “IFAs should not be regulated at all. We sell packaged products manufactured elsewhere, we have to be qualified at a basic level of competence e.g. pass exams which should be enough. Advanced exam -
inations should be voluntary. Clients have cooling-off notices and courts to protect them. What we don’t need is regulatory interference.”
The bizarre thing about this kind of suggestion is how outdated it is. Almost 16 years ago, when the Personal Investment Authority came into being, an IFA pressure group called Small Traders Action Group called on the new regulator to exempt advisers beneath a certain income threshold from the £10,000 capital adequacy requirements and other rules it regarded as “onerous”.
Stag’s co-founder Andrew Stradis, back then an IFA in Hastings, suggested investors could be safeguarded by introducing identity cards for advisers and by making it clear which advisers are not entitled to handle money. Failure to adopt Stag’s plans would drive up to 2,000 firms out of business, he warned.
Four years later, when the PIA’s chief executive Colette Bowe jumped ship before she was pushed by a newly elected Labour Government, I remember one IFA then serving on the regulator’s committees telling me she had “achieved nothing” and was “useless”.
Had there been such a thing as internet forums back then, I have no doubt that the same remarks would have been made about Bowe as they were last week about Sants - albeit with greater justification in the former case.
The bottom line is that regardless of which party is in office or the precise regulatory structure, tight controls on the activities of advisers will continue until it is clear that the bad practices of the past can no longer happen in future.
Sants’ departure makes not one jot of difference to that scenario. If anything, shorn of someone who had a vague idea of what he was doing, the future regulator’s new leadership is much more likely to adopt a get tough policy. They will need to prove, to consumers and the incoming Government that they can prevent bad practices.
Yet if last week’s comments are any thing to go by, many IFAs will continue to live on Fantasia and believe the same deluded rubbish as before. Not all IFAs, surely?
Nic Cicutti can be contacted at nic@inspiredmoney.co.uk
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Readers' comments (16)
Nick Bamford | 18 Feb 2010 10:46 am
Of course IFAs need to be regulated and only those incapable of doing the joined up thinking would suggest otherwise. The evidence for the need for regulation is compelling.
However, that regulation needs to be proportionate and I guess the main complaint from the IFA sector is that it perceives it to be a lighter touch regime for the banking sector (flogging their investment bonds at 7% commission) than for the "good guys" in the IFA sector.
The evidence offered to support this perception is that the FOS receives and upholds very few complaints against IFAs compared with complaints from other sectors.
This doesn't mean that regulation of the IFA sector isn't needed at all but it does mean it needs to be proportionate. I actually think that evidence of mis-selling as Nic describes proves that the regulatory system is working at least at the IFA level.
Hector's problem was that he was tainted with the damaged brand that is the banking sector
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Anonymous | 18 Feb 2010 10:53 am
Completely agree.
Is regulation always fair? Maybe not...
Are the FSA great at what they do...once again, maybe not.
But its here for a reason and that reason is poor advice and bad practice in the past. Im sorry but there is an awful lot of denial within this industry. Not all, but it is definately there!
The fact is that regulation is going nowhere, the FSA may change/be dispanded but regulation of some sort will still be there!
So as far as I am concerned you just have to put up with it and do your best!
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Dave Green | 18 Feb 2010 10:55 am
Well said, Nic. We'll wait for the usual suspects who post vitriol on any story referring to the FSA. If some of them spent as much time dealing with their clients as they do getting hot under the collar about the regulator, they'd have much less to worry about.
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Nick Taylor | 18 Feb 2010 11:16 am
Would you take legal advice from a partially qualified solicitor who is not regulated? Probably not! Why would you expect clients to take advice from advisers partially qualified and not regulated. Lets not forget that regulation protects both the client and adviser alike. I also agree with Dave Green - which bluntly translated means stop moaning and get on with the job you do best - roviding profesional and valuable financial advice.
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Evan Owen | 18 Feb 2010 11:32 am
Good piece again Nic, it sticks in my throat to say so after all you have said about me despite our never having met. That is the trouble with humans, they assume too much.
However, the anger and vitriol aimed at the likes of Hector is borne out of the frustration of being misunderstood, being pilloried for no reason and squeezed for every drop of cash to recompense people via the FOS and the FSCS for reasons unknown while the big boys get away with the proverbial murder each and every day.
Society is in dire need of regulatory balance, I see none. If this is what Parliament intended then this country is heading down a slippery slope.
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Man in Black | 18 Feb 2010 2:28 pm
Sorry, but I think I agree with Evan.
The reason there was such joy at Hector's demise - and such vitriol aimed at FSA - is because FSA has been such a bad, incompetent Regulator who looked in the wrong direction.
I guess it's like the day Connex lost their franchise. Trains in Kent haven't got any better since. But boy did that feel good!!
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LOL | 18 Feb 2010 6:18 pm
You are right nic Hector was great! look at the legacy he left for advisers - Just read the headlines in MM Leader today. Do you really question the vitriol against Hector and the FSA when this is the culmination of what advisers have had to put up with?
On your scooter.
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Mike Fenwick | 19 Feb 2010 7:27 am
Quote:
"On my planet, which we call Earth, one of the defining features of the financial services landscape over the past 25 years at least has been the near-continuous litany of misselling scandals, ranging from home income plans to endowments, personal pensions to split-capital investment trusts. Billions of pounds have been paid in compensation, inappropriately in some instances but entirely justifiably in most others"
Any one else find it interesting that the events listed by Nic - happened - after the introduction of "Regulation"?
Any one else find it interesting that the Banking crisis, which leaves us with the highest UK Government borrowing ever - happened - after the introduction of "Regulation"?
Yes, Regulation has certainly made a difference,.
The real fantasy is perhaps that is was a positive difference?
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Evan Owen | 19 Feb 2010 9:33 am
Well said Mike, despite all the regulations and expert journalism we still have a shambles two decades on.
Regaulation is indeed bust. But is no regulation the Panacea?
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Good IFA man | 19 Feb 2010 12:36 pm
FOS figures speak for themselves e.g. less than 1% upheld against the IFAs with over 59% against banks. I certainly can deal with proportionality.
E.g. charge me 99% less in fees, give me 99% less regulation, 99% less aggro, maybe 99% less qualifications and 99% less paperwork.
Dream on Nic you're just a wind up merchant!
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