There comes a point where you realise that someone is having a laugh. This term is frequently hurled at football referees when their legendary myopia causes them to miss a player who is clearly offside or perhaps scoring with a sneaky handball.
In this instance, I am thinking of the team that always wins, the FSA, and two of its recent pronouncements.
FSA technical specialist Rory Percival advised a Succession members forum that the regulator was concerned that some firms would not be able to operate viably under the RDR adviser charging rules. As a result, they would scrutinise contingency plans regarding possible insolvency.
Incredible, here we are in the midst of the worst economic downturn since the Great Depression.
Firms are struggling with this harsh reality while having to alter their previously successful marketing methods to accommodate Callum McCarthy’s theories concerning a broken distribution model. Yes, the self-same Callum McCarthy who in his new guise at Castle Trust is seeking distribution from advisers for a variation of the much vilified shared appreciation mortgage.
The FSA has been warned by industry insiders, personal finance journalists, consumer advocates, numerous MPs as well as the Treasury select committee that the RDR will prove counter-productive. Nonetheless, it lumbers on ignoring inconvenient statistics while championing dubious figures that support its aims.
Now, shortly before the terrible day arrives, they voice concern that the very policies they are forcing through could cause the destabilisation of firms.
Are they concerned for those firms and advisers? Are they sorry for pushing many to the edge of extinction?
Naturally not, their worry is that pipeline business might be hit and consumers might suffer as a result. It still does not seem to have filtered through that maze-like, box-ticking mentality that millions of consumers will suffer through not having a conduit into financial planning. Now that is what I call having a laugh.
The second portentous chuckle emanates from the pages of recent policy statement PS12/15 where, despite a majority of opposing views, the FSA has introduced rule 12.2.10 which enables the FSCS to pay compensation without “investigating the eligibility of the claimant” or the “validity of the claim”, where the costs of investigating are “disproportionate” or “it is reasonably in the interests of firms to do so”.
Let us consider these changes. Claimants who are ineligible for compensation might receive “redress”. Claimants without a valid claim might also receive “redress”.
Many insurers and banks operate such a system where they automatically agree “redress payments” up to certain level rather than meet the higher costs of investigation.
This may denote some financial logic when assessed in a strictly commercial sense although anyone with an ounce of integrity would surely refute any such device. The FSCS is a different matter, it is funded by industry levies and while costs should be kept to a minimum, the FSA is validating a cheats charter which will only serve to increase the widespread notion that we are fair game.
This is not having a laugh, it is not even having a chuckle, this is a riotous collective guffaw rising from deep within the fetid bowels at E14.
Alan Lakey is partner at Highclere Financial Services