As a child I was cautioned that the law was sacrosanct, that people far more knowledgeable than I would ever be had painstakingly considered, debated and determined what was fair, right and proper.
Leaving aside that thoroughly discredited fairytale, I was recently reminded of my earlier gullibility when I received word from Foresters concerning the Children’s Mutual closed book it had acquired.
Children’s Mutual placed all its eggs into the child trust fund basket, with the consequence that its future became unviable when, in May 2010, the Chancellor abolished CTFs and introduced children’s Isas. The company was taken over by Foresters in April 2013.
Like many advisers I gave business to Children’s Mutual and its previous incarnation the Tunbridge Wells Equitable Friendly Society. My clients took out contracts which incorporated renewal commission, enabling the cost of reviews to be met or subsidised. These policies were three-way contracts between client adviser and product provider and subject to both agency law and contract law. Foresters’ missive advised me that “in the interests of its customers” it was ceasing future commission payments and would provide a one-off payment in full and final settlement.
Foresters said the full and final settlement figure would represent its estimation of two years income. I have suggested that if it is so well-intentioned regarding these customers it would be very much in the customers’ interests if Foresters similarly agreed to decline future payments in respect of administration and fund management. Perhaps, in imitation of its planned design for my business, it could evolve into a charity and offer free fund management. To date there has been no response.
In a comparable vein, TSC member David Ruffley MP recently used the Freedom of Information Act to establish that 15 senior FCA personnel are using their own limited companies to avoid tax on their contractual pay.
We often hear the FCA is no longer the box-ticking authority but a more outcomes-based regulator focusing on the ethicality, the spirit and the intent of the law.
This is another instance where it appears to be saying do as we say but not as we do. If the counter- argument extends to legality, and that no laws have been broken, then maybe the industry can expect the return of the 15-year longstop defence which continues to operate as part of the Limitation Act and remains in effect for the rest of the UK.
After all, this is a lawful defence that was summarily removed on the basis that it was against the public good. Reducing the tax levy available to the Exchequer must also be against the public good so to the FCA I say, lex non distinguitur nos non distinguere debemus.
Alan Lakey is the principal at Highclere Financial Services