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Can we trust life companies?

Reading Dave Harris&#39 lengthy narrative on how Prudential effectively stole away a client from him, I am reminded that such treatment, although shameful, is not particularly out of step with the general attitude of most life companies these days.

To them, IFAs are just one more source of business but not one to be accorded any special respect or priority. The only life companies in which we IFAs can place any trust at all are those who accept business from IFAs only and from no other source whatsoever – no tied salesmen, no cosy links with the banks, no off-page selling, just IFAs.

But how many of them are there? Hardly any at all, but they do exist. Seek them out, for all others come to you bearing false gifts.

Turning now to Peter Emery&#39s letter on the issue of the FSA&#39s failure to define clearly what constitutes misselling, what this surely boils down to is what went in the letter of recommendation.

Once again, like so many bureaucratic monoliths, the FSA seems to have inordinate difficulty with getting to the heart of the issue and tackling it accordingly.

The crucial document of any sale process is the letter of recommendation (known this year, in FSA parlance, as the “suitability letter”).

It is the risk warnings in the letter of recommendation on which an advisory practice must rely to defend a complaint which, in turn, will usually be founded on the premise that if the complainant had been in possession of all the possible risks of the product in question, then he or she would not have committed money to it. If the defending practice can prove that all the possible risks were discussed and explained in the letter of recommendation, then the complaint can be rebuffed.

So, from this premise, all the FSA needs to do is to draw up and make available to practitioners all the risk warnings that need to be included for all the various products out there. A risk warnings&#39 handbook could (and jolly well should) be compiled by FSA and if a letter of recommendation is found subsequently not to have included all the relevant paragraphs prescribed in the edition of the risk warnings handbook current at the time of the sale, then that would be the standard by which the complaint would succeed or fail. Amendments to the handbook subsequent to the date of the sale would not apply.

It does make you shake your head in despair, doesn&#39t it? Once again, how many regulatory personnel does it take to change a light bulb? Evidently still far too many.

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