As everyone who knows me will attest, I can bore for England on the subject of vintage scooters. I am active in my local and national clubs, in the latter case as the “moderator” for a website where anyone can come on and discuss their hobby.
One of the things I have learned about moderating people’s comments on the internet is that those who do have something to say are rarely representative of the wider group. It is important for me to bear this in mind because if I didn’t I would be driven almost to despair by some of the drivel I read, in this case from IFAs commenting on the impending departure of Hector Sants from his position as FSA chief executive.
I have never met the guy but those who have tell me he is not just brainy in an abstract way but very sharp with it. His previous experience in investment banking means he has a better insight into many of the issues that almost led the UK economy into melt down 18 months or so ago. By all accounts, Sants is highly respected by his staff, politicians and others who have met him (those to whom I have spoken at least).
Yet you would have little idea about any of his if you look at the comments posted on many of the websites where IFAs congregate, after it was announced that he would be leaving in the summer.
On Money Marketing’s website, the overall flavour of reaction was caught by one adviser, who wrote: “GREAT STUFF, hope the rest of the FSA and FOS depart before they devastate the IFA with RDR and give retail distribution to the Banks to destroy.”
Reading this kind of stuff makes me wonder what planet these IFAs live on.
On my planet, which we call Earth, one of the defining features of the financial services landscape over the past 25 years at least has been the near-continuous litany of misselling scandals, ranging from home income plans to endowments, personal pensions to split-capital investment trusts. Billions of pounds have been paid in compensation, inappro priately in some instances but entirely justifiably in most others. On the IFA planet, let’s call it Fantasia, none of this has happened. Or if it has, none of it was the advisers’ fault. Or if some of it was, the solution is certainly not tighter regulation but much looser controls on how the industry operates.
As another response to Sants quitting, put it on the MM website: “IFAs should not be regulated at all. We sell packaged products manufactured elsewhere, we have to be qualified at a basic level of competence e.g. pass exams which should be enough. Advanced exam –
inations should be voluntary. Clients have cooling-off notices and courts to protect them. What we don’t need is regulatory interference.”
The bizarre thing about this kind of suggestion is how outdated it is. Almost 16 years ago, when the Personal Investment Authority came into being, an IFA pressure group called Small Traders Action Group called on the new regulator to exempt advisers beneath a certain income threshold from the £10,000 capital adequacy requirements and other rules it regarded as “onerous”.
Stag’s co-founder Andrew Stradis, back then an IFA in Hastings, suggested investors could be safeguarded by introducing identity cards for advisers and by making it clear which advisers are not entitled to handle money. Failure to adopt Stag’s plans would drive up to 2,000 firms out of business, he warned.
Four years later, when the PIA’s chief executive Colette Bowe jumped ship before she was pushed by a newly elected Labour Government, I remember one IFA then serving on the regulator’s committees telling me she had “achieved nothing” and was “useless”.
Had there been such a thing as internet forums back then, I have no doubt that the same remarks would have been made about Bowe as they were last week about Sants – albeit with greater justification in the former case.
The bottom line is that regardless of which party is in office or the precise regulatory structure, tight controls on the activities of advisers will continue until it is clear that the bad practices of the past can no longer happen in future.
Sants’ departure makes not one jot of difference to that scenario. If anything, shorn of someone who had a vague idea of what he was doing, the future regulator’s new leadership is much more likely to adopt a get tough policy. They will need to prove, to consumers and the incoming Government that they can prevent bad practices.
Yet if last week’s comments are any thing to go by, many IFAs will continue to live on Fantasia and believe the same deluded rubbish as before. Not all IFAs, surely?
Nic Cicutti can be contacted at firstname.lastname@example.org