View more on these topics

A perfect storm

Perfection is easy to achieve if you set low standards but it is clients who will suffer

In a business as important as financial services, those failures can look very bad, particularly when viewed in isolation by the client one has failed. Individual failures of advice are unavoidable, however. All humans have bad days and all make mistakes – even you. That is why advisers carry big professional indemnity insurance policies. They are the evidence of our honest acceptance of our humanity.

But the days of systemic failures in advice are almost over. The endowment boom was the last time a bunch of inexperienced big-brand businesses plunged into the advice market in search of bumper profits.

The new wave of big-brand entrants to financial services are determined not to make the mistakes of their predecessors. The likes of Tesco and Direct Line have decided not to advise. Under current FSA rules, this allows them to strive only to reach a low common denominator, which makes perfection easy to achieve.

All they need is to do is disregard suitability as an issue and they can be low priced, easy to buy and profitable. Non-advisers need everything to be simple and automated enough so that consumers are not so confused that they realise they really need advice.

Striving for something that looks perfect because it does not need to suit the customer is easy and very profitable. Mortgage payment protection insurance accounts for around 10 per cent of all clearing bank profit in the UK. Now that’s how you do it.

Supermarkets and other businesses with huge, loyal customer bases are driving into non-advised life insurance sales ever harder because there is no risk, under present FSA rules, of brand damage, because it simply does not matter if the sale is suitable to the customer or not.

What joy and what a clever way of shafting the consumer. Let them do it to themselves.

The only thing that stands in their way is if the regulator realises that they are breaching the core FSA principles because they will necessarily cause a rise in sales of unsuitable policies. So they need to lobby the Treasury to keep the regulator tucked up and delay the realisation that protection is a very high-risk buying decision.

Remember, too, that advisers will always have to deal with bad press. After all, one bad mistake a day across the 26,000 registered firms is a tiny error rate but plenty enough to keep the media supplied with human inter- est stories for ever.

Governments and regulators hate inconsistency. They love fail-safe processes that cannot let anyone down. That they can never lift anyone up, either, can seem the lesser of two evils in the eyes of a politician or civil servant.

Only the brave will seek to defend a process which lets a consumer down every day.

But if advice is not defended, the consumer will buy what they rarely need – small amounts of life cover – and never realise what they really need. That is causing a breach of FSA principles, if ever anything was.


Law Society support for lawyers producing Hips

The Law Society is planning to develop a product enabling solicitors to prepare home information packs for consumers selling their homes.The Government is planning to introduce Hips in 2007, and the Law Society will offer a fast online service, and will be fully compliant.As the rules are not yet in place, the Society does not […]

Relying on family advice can be costly

Research from stockbroker Brewin Dolphin shows 53 per cent of people who invested in a unit trust over the past five years consulted an IFA and 77 per cent were satisfied or very satisfied with its performance. Out of the 31 per cent of investors who turned to friends, family and colleagues, or the 37 […]

Deal struck on public sector pensions

The Government and unions have reached agreement to reform public sector pensions, with the retirement age for new entrants rising to 65 while current workers continue to retire at 60. The deal was struck at the Public Sector Forum, made up of public sector unions and the Trades Union Congress, and includes a Government guarantee […]

Dangerous U-turn

Will taxpayers have to bear the consequences of the Govt’s retreat on pensions?

In Focus image

In Focus — May 2015: private medical insurance market in Germany

Welcome to the latest edition of In Focus. In this issue, Jelf examines the private medical insurance market for employers with expatriate workforces in Germany. This includes the common challenges faced in sourcing appropriate coverage, along with a selection of available solutions. This will be of particular interest to HR/reward decision makers with employees based in Germany. It will assess the cultural norms, risks and backdrop that are relevant to organisations with expatriate staff in this location.


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm