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Future prospects

It is the year is 2015 and the UK economy is slowly recovering from “the great banking and misregulation crises”.

The financial and political world is far different from 2009. The Tories recently assumed power and one of their first tasks was to dismantle the FSA and, in line with European Economic Community tenets, replace it with a body accountable to Brussels under the stewardship of Angela Knight.

Sir Hector Sants has been rewarded for his services to the industry and, with five cosy non-executive directorships and a pension pot of £3.5m, has retired to Oxfordshire. Dan Waters has become the new director general of Ofgem whereas Jon Pain took over the chair at Barclays RBS/HBOS and various other regulatory staff migrated across to the OFT and other quangos.

With the FTSE100 hovering at 6,250, a degree of optimism is back and investors are at last returning to higher-risk investments in recognition of their long-term potential. The question for many investors is where to go for advice and arrangement of these plans?

One effect of the RDR, which came in three years earlier, was a reduction in the number of independent advisers to 4,000. The costs of regulation, capital adequacy and the funding of the voracious FSCS had altered the equilibrium. Advisers that had offered their services to the public were compelled to leave the industry or tie to one or more providers. Those few remaining concentrated on the high-net-worth sector which had shrunk dramatically due to the 2010 depression.

The bulk of the population lost access to whole of market advice. Internet sites abound as they imply low-cost, click-button solutions without the need for advice and without the protection of the ombudsman.

The banks are busily mending their balance sheets by aggressive marketing of financial products via their legions of “money guidance counsellors”. Their sales staff offer “guidance” on simple plans from a very limited range with no fee or commission. Such a service has attractions for the unthinking and is extremely profitable for the banks. All bank “counsellors” are incentivised by an annual bonus arrangement which has a connection to the levels and types of business written but, as this is neither commission nor fee, it is neither agreed nor disclosed.

Bucket shop brokerages continue to prosper and only a few journalists continue to point out the perils and potential inferiority of the choices. The pension and protection gaps have continued to increase and there is discussion in Parliament about the creation of a national life and health insurance scheme.

The new regulator has accepted that potential clients do not want or need to be given a hundred pages of confusing, regulatory piffle and a simple one-page sheet is now provided, explaining the limitations of the advice process and where to go to obtain further information. The concept of caveat emptor has been re-legitimised by dint of judicial review and consumers are increasingly expected to enjoy the rewards and suffer the consequences of their purchase decisions.

Alan Lakey is a partner at Highclere Financial Services

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