The elephant in the room is becoming a rather overused term but please excuse me as I apply it one last time to the retail distribution review.
The problem the FSA has is that it cannot ever hope to look at the full picture because it cannot criticise Government policies and, indeed, its own as fully as any genuine review would have to.
It means that with any review, there are several very big and very aggressive elephants in a rather tiny room devoted to looking at financial advice.
Take Elephant One. Let us rather ironically call her Prudence. In other words, Government economic policy and how it rests on the behaviour of society. We are riding on a wave of individual debt fired mostly by house prices but also credit cards and other loans. This has at least helped the economy bobble along although some might say bubble along.
Successful savings policies might diminish this. Cleverer minds than mine of an economic bent may be able to say whether or not a substantial increase of money going into savings would actually lead to an increase in investment and so help the economy. But what is Government policy on this? Surely the Treasury should state what it wants to see? What the goal is in terms of savings, whether in pensions or outside them.
Elephant two. Let’s call this one Welfare. Not as catchy as Nelly but never mind. This is all about means-testing and the punishment of thrifty living. Now, this may not apply in Yorkshire where they may save anyway. But how can anyone pontificate about the mass market or how many advisers are not serving it when Government policy designed to lift the lowest income groups out of poverty has penalised those just above poverty when they save?
We come neatly to elephant three. This one is called the Personal Account. Poor elephant. Awful name. However, this is one elephant the FSA ought to be looking fully in the eye. It breaks all the FSA rules. It breaks all the ombudsman’s rules. It is an exercise in pulling the wool over the eyes of the public which would have John Tiner and Walter Merricks screaming misselling if any adviser or bank was doing it.
This elephant may hurt the level of savings. If the FSA has to swallow policy on this elephant, it cannot do its job. Look at stakeholder, an older white elephant. The clever people in the FSA knew stake-holder would not work and that its decision trees were a nonsense but they still had to pretend they were a great idea. Any review cannot ignore this reform but it may.
Elephant four, called Taxation. This is not about taxation per se but about U-turns, uncertainty and suspicion. It is about a Government desperate to glean revenue from any source and that has never had an honest debate about what different taxes are for or why they are in place. It is also about tax-incentivised saving and whether it is a good idea worth preserving. Remember ministers suggesting it did not work, thanks to Ron Sandler? What does the review think and will it dare to think?
I could go on. There are other baby elephants which are still pretty damaging when placed in a room such as Caveat Emptor elephant, Hindsight elephant and Bear Market elephant.
But the final big elephant is also very threatening. This is FSA the elephant. This elephant does not know whether it wants to rule by edicts, by laws, by principles, by retrospection or, true to the colour of its skin, by some indefinite grey colour. Oh dear. Will the review dare to look in the mirror and be put off by its own long trunk?
It is important that adviser remuneration is seen as an important structural part of the market and it is certainly not perfect in its operation. The quality of advice should be monitored and improved and, if possible, qualifications raised. It would be nice if advice could reach further down the income scale. It would be a better market where there was a clearer alignment of interest between manufacturer, distributor and customers. But before anyone mentions commission or other emotive words, surely someone needs to note that the whole framework surrounding tax and savings is a mess? It works at least partly because many advisers help the public find their way around despite Government policies and disincentives.
The review might make some sensible suggestions but what is the point if they get trampled on by this trumpeting and yet unheard herd of elephants in a very small room.