The Christmas and New Year interlude offered an opportunity to reflect on the past year and particularly the struggles that honest advisers have with their regulators – the FSA and the FOS. It also afforded time to catch up with various articles where it became readily apparent that the careless use of language is in danger of doing us all a disservice.
Misselling is a word that has inveigled its way into the mainstream. It is accepted as a description of financial wrongdoing and is used by the regulators and most journalists without compunction. You will note that one never reads about “misadvising”. It is an unstated assertion that advice is good and selling, well, it is a bit suspect, isn’t it, and causes complaints and stuff. It will be most revealing to see the post-RDR complaint figures. Presumably, investment and pension complaints will magically end in 2013 because it will all be about advice.
I also pondered on the differences between the freedom and assistance afforded to consumers compared with regulated firms. The FOS explains that it provides “a free, open and accessible public service available to everyone”. Contrast this with the situation that firms encounter when they believe the FOS has dealt them a bad hand.
Consumers are free to level complaints with impunity and they are never punished or censured for opportunism, fraud or libel. If the complaint is rejected, they remain able to institute court proceedings.
How about advisers? What if they are unhappy about a decision by the FSA or a determination by an ombudsman? The only option available is a judicial review but there are many difficulties to overcome. First, a judge has to agree to JR, something that will automatically be opposed by the £500-an-hour barrister representing the FSA/FOS. Second, the cost of a JR can easily exceed £100,000, proving emphatically that only the very rich can afford justice. The third problem is that a JR can only look at if due process and the law has been followed. It is not able to look at illogicality, stupidity or any other unreasonable regulatory behaviour.
Keeping to this theme, the Ministry of Justice (another one for the trade descriptions guys) advised me that it can only accept complaints about claim instigators from those that use their services. Advisers who have been defamed and suffered attempted fraud cannot pursue justice via the ministry responsible for justice.
I have also noticed that the mood of advisers has soured regarding the RDR and the FSA. Many of those who sat on the sidelines, including many who initially supported the RDR, have latterly seen it for the incredibly expensive fiasco it is. They have also finally realised that their regulator is uncontrollable.
What has it come to when an unaccountable industry-funded leviathan is enabled to stalk the financial services landscape with such impunity? It is protected by statute and is uncontrollable, even by the body that created it. Mary Shelley could not have foreseen that her nightmare fiction would assume flesh, as it were, in the 21st century.
Alan Lakey is partner at Highclere Financial Services