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Alan Lakey: Logic escapes financial services

The latest litany of nonesensical, odd and obstructive behaviour seen by financial services firms show they operate in a different world to the rest of us.

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I was hoping that 2014 would prove a better year for those who, like me, consider balance and rationality to be essential rather than occasional components of everyday financial life.

My optimism was shattered pretty quickly by Lloyds Bank which refused my son a student account despite him banking with them and despite him being a student.

It transpires that their requirements now extend to his parents also banking with them. My wife has several Lloyds Group accounts with the Halifax but, somewhat predictably, these don’t count.

Then in a recent letter Cofunds elected to raise the idiot bar an additional notch.

Having been advised of a client’s new address they responded with a request for the previous address. You know, the one where the client was living last year when the funds were invested. You know, the one currently shown on their website!

Franklin Templeton then piled in with a tortuous correspondence. My client (and their customer) wanted to encash £40,000 and wrote to them confirming this.

This resulted in her receiving an encashment form with three designated spaces for the four funds she wanted to encash. I returned the signed form with a letter setting out her exact requirements which then prompted a request for proof of identity and address.

Regardless of whether these companies actually need these items or are being overly pedantic, the administrative burden caused by this adds massively to the time spent and, as we all know, time equals money.

We have seen the removal of self-certified mortgages and non-status loans and the MMR will place an even greater onus on lenders to ensure affordability which is why I recently raised an eyebrow when purchasing a car at an Audi dealer.

I chose to take finance through Audi’s own company and set about completing the loan form. Once completed I realised there was something missing – at no point did it ask for income details.

Apparently financial profiling is being used and it begs an important question, if a mortgage lender is able to register a charge on a tangible asset such as a detached house (as opposed to an unsecured loan on a depreciating asset) then why cannot lenders extend flexibility to those borrowers whose profile suggests that they can repay a mortgage?

Logic suggests that this would speed up administration and enable loans to borrowers who currently fail to fit the narrow lending parameters.

Of course, as I point out to every client, logic and the financial services industry are strangers that meet occasionally and then only by chance.

Whilst on the subject of mortgages I recently received a sad and dispiriting reminder of why the MMR will impose unintended and negative consequences on consumers.

Some years back C&G provided an elderly lady with an interest-only mortgage with her son as guarantor this loan currently being 40 per cent of the property value. The loan is now due to be repaid and the lady, age 97 and suffering from Alzheimer’s, is being given a week to repay the loan or suffer legal consequences.

Her son has power of attorney but C&G will only deal with his mother. The son is financially able to act as guarantor but the new rules mean that the loan has to be terminated.

And this from a lender funded by the UK taxpayer.

Alan Lakey is partner at Highclere Financial Services

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. And there folk’s you have it !!

    Definitive proof we work in an industry totally devoid of any common sense !

    Good article Alan; ( although stating the obvious ) a issue that needs to be aired, as we all, probably have very similar tales to tell.

    In the regulators drive for financial nirvana, we have all gone snow blind from all the paper.

  2. Alan

    I think you have been in this business longer than I have. I am therefore somewhat at a loss as to why you now find this surprising. When I first entered it became immediately apparent to me that compared to the large firms I was used to dealing with – BP, Shell, Dow Bayer, Hoechst etc., the large firms I now came across in my new career seemed to be run by those with far lesser ability.

    Over the past 28 years not a lot has changed. Yes there are some excellent firms, sadly vastly outnumbered by the mediocre and downright sub- standard. In many ways things have got worse – off-shore call centres, undermining to save cost and the general overall decline in educational standards. (To name but a very few).

    Dealing with these people on a day to day basis is very wearing – as I’m sure many advisers will agree. In this business the customer (us) certainly does not come first.

    As you have come to expect there is one aspect on which I very much disagree with you. I think it is high time that lenders have reverted to the stringency we saw 40 years ago. Lax lending led in great part to the crash of 2008. Borrowing for a house is normally over more than 20 year at considerable sums of money – probably the largest debt any individual takes on in their lifetime. Eviction for non- payment is a tortuous process. A car loan is for far less over a relatively short term. There are two bites of the profit cherry – the dealer margin and the margin on the loan. Non- payment results in a pretty smart repossession. I really don’t think the two are in any way comparable.

  3. goodness gracious 30th January 2014 at 10:30 am

    I have a client with dimentia that is so advanced he cannot talk, walk etc. His brother is his deputy appointed by the court. The Pru wants details of his previous addresses prior to releasing a 9K pension into a very enhanced annuity to satisfy the local authority. (very complex case) He can’t tell, the brother does not know, and the Pru does not seem to understand just what a deputy is, continuously mixing it up with an attorney. Result, impasse.
    I blame it onto computer systems and decision trees, taking out the need for skills training. In the old days, both for loans and admin, someone with skills and training made a decision. We as advisers still do this, but, alas, it seems to have dissapeared from the corporate world.

  4. Alan – Don’t worry it’s not just insurers.

    Booked a week in Turkey with the wife and three kids with Thomas Cook. Flight leaving first day of school holidays, 7am from Gatwick. Received an email saying they have change the flight time to 17.45. There is a flight which is £120 per head cheaper than the 17.45 flight, it leaves at 7.05am.

    They will only switch me to the 7.05 flight (5 minutes different to the original time) If I pay £350 plus £275 admin fee – which they reluctantly waive due to good will. No refund as it “clearly states in the terms and conditions” that they can vary times by up to 12 hours.

    No process to refer to a manger or complain.

    The point is that companies with this “take you money and do what I like” or “its in the terms and conditions” strategy are doomed to failure, primarily due to social media – Lysses Hotel springs to mind. Even Ryanair have worked this out – current strategy to quote Mr O’Leary “To stop pissing people off”. He is right.

    Will be interesting to see if companies change and who the winners are over the next ten years.

  5. Jason, you are probably right, i mean Thomas Cook have only been in the holiday market for about 5 minutes and this is the first time i have ever seen anyone complain about their T&C’s or their level of service! I reckon they will change and will certainly book flights that are less than half full because they are there to serve, they dont care about profit in anyway.

    Maybe instead of using the ‘big boys’ you should have gone to a small independent travel agent who would look after their customers better, but maybe they are slightly more expensive! The expression ‘you get what you pay for’ springs to mind. Or do you buy all your financial services through a bank because they do it for ‘free’???

    But then again, reading the article, maybe using a small firm doesn’t make any difference because helping you encash a policy is far too much work apparently – although i believe Alan was paid for his servicing when the policy was setup? Or should we be referring to the T&C’s?

  6. @ Jason

    Thomas Cook – oh poo! Next time book with a decent travel company like Kuoni. You’ll be treated rather better and less like cattle.

  7. Harry – Thanks, more sympathy than I got from TC.

    To clarify this was a one-way flight, bought online, due to price, brand and convenient take-off times.

    Maybe the analogies with the insurance industry are deeper than I first thought.

    Maybe I should have gone to an agent. Maybe the agent would have a wider range of options than I could find online, they may have analysis of company’s TandCs, experience of the market, ability to negotiate and access to the mystery complaints department. Maybe the agent would not have been so thorough.

    Maybe I would have valued the input of the agent, maybe I wouldn’t.

    Maybe I’m the type of person who buys a term insurance online, auto-enrols with the minimum contribution rate and realises both are in-adequate when its too late.

    Maybe for a simple transaction, you would imagine that the provider would need a good website, with good service – people in call-centres with the intelligence, attitude and authority to apply some common sense.

    Maybe if insurers and TC get this right, we won’t need agents in the future.

    Maybe that might take a while.

  8. Jason

    You are so, so, so right!

    I guess I am well capable of booking a holiday on line, but I don’t. I always use a travel agent. I ring up, tell them where, when and how much, from which airport I’d like to travel and make it clear that I won’t fly before 10.00 and after 14.00 if flying in and around Europe.

    I get a few choices take my pick and off we go. If anything goes wrong I can complain to the agent who sorts it for me.

    So it is with Financial Services. That’s why we are in business. I have clients who are more than capable of doing it themselves, but I have often said that in effect I am a financial travel agent.

  9. I never ever book with travel companies any more they are all a set of bankers.

    The issue is what are clients paying for?

    Advice? Often but not always
    Time? Always

    I have many wealthy clients who are far more adept at making money than I am, but, they are busy people and many of them know their stuff. So I don’t try to bamboozle them with how brilliant I am, instead I sell them my time. That is something they do value.

    As for Alan’s article, I’ve been doing this job for 25 years. It’s nothing new!

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