Looking back over the 20 years since Money Marketing was launched, the surprise is how little has actually changed, given how much consumer legislation has been enacted during that time.
Cowboy salesmen still roam the retail financial prairies, not to mention those who have swapped their boots and stetsons for pinstripe suits and sit behind stockbrokers’ and investment bankers’ desks.
On the positive side, inflation seems now to be largely under control – except where it matters, in house prices. First-time buyers, who used to be constrained from buying their own home by the requirement to save a 5 percent deposit with a building society, now simply cannot afford to buy.
The regulator has been largely ineffectual in preventing financial scandals and is still shutting the stable door after the horse has bolted.
Perhaps the worst example of regulatory failure has been the split-cap fiasco, which has never been properly investigated. Only a couple of minor heads have rolled for what was, at best, market rigging and, at worst, fraud. No one is behind bars.
If we are being charitable, misselling could be put down to an inability of financial institutions’ management to appreciate the culture change which should have taken place in the new regulatory environment. But the splits disaster was a calculated attempt by a number of players in the market to mislead investors. The FSA and/or the fraud squad should have pursued it further.
Consumer protection is much better now than in1985, thanks largely to the Financial Ombudsman Service. But if the FSA could do one single thing to improve the provision of financial services to the man in the street, it would be to get tough with the chief executives of financial institutions.
For too many still regularly and cynically rip off their clients, secure in the knowledge that the worst that can happen is that the company will be fined a few million pounds – nothing in the context of their marketing budget. We need look no further than Abbey, which has just been fined for turning down legitimate endowment misselling complaints, for an example of how attitudes have totally failed to change.
What must happen is that chief executives are held accountable for misselling on their watch and personally fined and removed from office. If this requires extra powers for the FSA to levy fines – and fines that hurt – then the regulator should have them.
One of the worst aspects of the Equitable Life disaster is that Roy Ransom and other senior executives, who have personally and, arguably, knowingly wrecked the retirements of a whole generation of pensioners, will probably never be called to account.
The FSA does have powers to remove unfit executives and it should be much more willing to do so. Nothing would bring about a change of attitude faster than the fear of not only losing their job but being banned from working in a similar function ever again.
It is time for the watchdog to bite – and for it to be seen to bite.
This is my 1,000th article, I believe, as I have written for every issue of Money Marketing since it began two decades ago.
Financial services and taxation have changed dramatically in that period. Twenty years ago, basic-rate tax was 35 per cent, with higher rates of 48 per cent and 60 per cent.
These rates have fallen dramatically but, on the other hand, indirect taxes have risen hugely and a lot of tax loopholes have been closed.
The principle of caveat emptor – buyer beware – has gone right out of the window and misselling is now deemed to occur whenever a pension plan, endowment policy or even a with-profits bond goes wrong.
Nearly all IFAs – except for a few rogues, hopefully now out of the industry – have recommended investments or sold life policies which have not met investors’ expectations.
However, several influential journalists in the national press have taken it upon themselves to castigate IFAs and product providers which sold products which appeared right at the time.
In some cases, these products were even praised by the press at the time they were promoted, only to receive condemnation instead when they did not live up to expectations.
Pension policies are an example of this. Much of the problem with pensions has not been the fault of the insurance companies but is due to falling stockmarkets and the iniquitous taxing of pension funds by Chancellor Gordon Brown. Most so-called misselling seemed sensible advice at the time.
Since the mid-1980s, returns on annuities have more than halved. This is partly because advances in medical science mean that people are living longer and partly because interest rates have fallen.
However, the good news is that term insurance rates have improved dramatically – by as much as 50 per cent in some cases.
While interest rates have fallen dramatically, house prices have risen by leaps and bounds. Stockmarkets have been difficult to forecast but there have been some very good years and a few bad ones.
Nevertheless, over the 20-year period since Money Marketing was launched, both the stockmarket and commercial property have far outperformed bonds and cash deposits.
Life for an IFA is much more complicated now and is much more stressful than it was in the 1980s. In most cases, business is not so profitable but life generally does have compensations.
Most wine is better now while cars are cheaper, much more reliable and better designed. British restaurants are 10 times better than they were 20 years ago and travel is both cheaper and improved.
There is still a good future for financial services although there are likely to be more ups and downs than there used to be.
May I wish all IFAs and product providers the best of luck over the next 20 years.