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Hector missed the ball

So farewell Hector Sants. It is unfair to blame the man alone but has there ever been a more disastrous period in the history of Britain’s financial risk management than his period in charge of it? Could anyone have watched the wrong ball for longer?

It is perhaps a shame to see the man who has now learned so many lessons, moved on by the modern civil service culture, no doubt to learn more lessons, controlling a new field. I wanted you to stay, Hector, so you could bring experience and mature caut ion to regulation, instead of the adoles cent enthusiasm for change and progress that retail financial services has endured from you and your predecessor.

While the above blurs the macro and micro sides of regulation, the truth is the columnist knows nothing much about the former and 20-odd years more than Hector about the latter. Micro in this context means being concerned with individual con sumer outcomes in finan cial services transactions, alth ough its allusion to medd ling and boxticking has also been borne out these last three years.

Thus the Conservative plan to split macro and micro makes real sense, if it can be properly managed through, because the culture needed to do either job is totally at odds with the other.

In the case of the micro, or retail side of financial services regulation, the key is the compromise between what works for the seller and the
buyer. Focus only on the latter, as the FSA has done since 1987 and, as that most mighty consumer champion Jeff Prestridge acknowledges, you make the former ever less able to grow and improve their service. And when the country’s economic health depends on that service being provided, you end up exactly where we are now, with prudent consumer financial behaviours and experienced financial adviser numbers in headlong retreat and savings ratios and IFA recruiting at record lows, all as the regulator eats its small paymasters one by one.

But for every loser in life there tends to be a winner and it is easy to spot those. Just look where the regulatory touch has been lightest. Debt
had its (dark) day in the sun, blossoming until the regulator spotted it, and now, just when easy money is economically needed, so the regulator ratchets up the controls.

And non-advised selling is the current beanstalk, with its market share in protection predicted to double this year and Peter Hargreaves the living proof that you make profit best by wisely working around the regulator, not with it.

So Hector’s successors then – for the Conservatives envisage two of them – face very different futures. Macro-man at the Bank of England has his path laid out but Micro-man will, I expect, be told to protect the wider consumer interests, by relaxing a little on the need for perfect outcomes and thus allow again the profitable promotion of savings, pensions and protection.

Advice is not on that primary list. Hector’s eye for the wrong ball has made the non-advised sellers’ triumph certain. The best advice can hope for is that Hector’s successor will be told to turn the RDR around and use it to grow the ranks of the IFA, as the proven best server of consumers’ needs.

Tom Baigrie is managing director of LifeSearch

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Comments

There are 16 comments at the moment, we would love to hear your opinion too.

  1. Surprise, Suprise. 20 plus years of adding one layer after another of largely unneccesary compliance making the advice process unprofitable unless dealing with the relatively wealthy.

    The FSA seem incapable of accepting that they have been flogging the wrong horse. Stop obsessing about the advice process – start regulating products for the mass market and then let the majority get back to selling products that clients need.

  2. I would go as far as to say that Hectors eye was not only on the wrong ball, I think he turned up at the wrong game!

  3. Incompetent Regulators Awards Team 17th February 2010 at 4:25 pm

    I agree with John Blackmore’s comment about regulating the products, but must add not by monkeys as we have now at the FSA.

    IFAs should not be regulated.

    Reminder

    pre Mr Boom & Bust we had the best privately funded pension shemes on the whole world. Now thanks to the world class regulator we have a decimated pension sector with over 90% of final salary schemes not being able to meet their promised benefits.

    listen to the best distribution channe.., the IFAs. We’re good, honest and cheap.

    Oooooh I nearly forgot……….the banks nearly collapsed whilst under thr FSA watch!!!!

  4. Can anyone name a single postive FSA outcome in the last three years…

    I’ll make it easier; EVER?

    No? Nuff said

  5. Hectors eye wasn’t on the IFA ball it was his feet!!

    Sants inherited a legacy from the feeble minded that had gone before. To his discredit he still failed to call off the dogs unleashed by Callum McCarthy’s infamous Gleneagles speech, in which McCarthy laid out his plans to hand over IFA distribution to the banks at the expense of mass market independent advice.

    All was going according to the FSA/Treasury Illuminati plan until events took over and those very same banks disgraced themselves. Sants epitaph will not be RIP it will read RDR, and not a tear will be shed from those whose destruction he planned!

  6. Why the sympathy for Sants – he’s just a massively overpaid civil servant who’ll now move on to another non-job paying outrageous salary, pension, bonuses and expenses. And what has he ever done which might have been worth doing ?

  7. Re: Incompetent Regulators Awards Team

    If we are going to bash the regulators let’s at least get the right one. The dismantling of the DC scheme sector started with the bouncing Czech, Bob Maxwell that gave rise to OPRA, now the Pension Regulator. Together with HMRC paranoia about tax reliefs schemes were forced to reduce surpluses massively, oh and Cash Gordon’s ACT raid on schemes in 97 didn’t help either.

    No love lost for other regulators but please give the award to the right team!

  8. Michael White CEO Emailmortgages.com 17th February 2010 at 5:01 pm

    I believe the FSA is the EastEnders of financial services. It purports to be following real-life events and reacting to them with ‘real-life’ regulation but it is in fact regulating in a ‘Soap Opera’ bubble where the theoretical is put into practice regardless of market realities. For example, from the Credit Crunch, liquidity crisis and subsequent recession we now have proposals that seek to regulate everything deemed ‘risky’ in the hope that perfection and a risk-free environment can be achieved.

    The prime example of this is the attempt to regulate self-certification mortgages out of existence regardless of the fact that, at a conservative estimate, we have approximately one million borrowers with self-cert products who will never have missed a mortgage payment but are now probably wondering what the hell is going to happen to them when their deal ends. With this proposal the FSA seem to be saying that self-cert was the cause of the Credit Crunch and therefore we need to expunge the product from history. This is quite patently nonsense and it shows a complete lack of knowledge and consideration for the current economic situation.

    As we come out of recession, entrepreneurs will look at the climate and many will look for the opportunity that comes out of this adversity. It will be this band of people who will start businesses, who will generate income, jobs and taxes to help haul UK plc out of this mess. And yet, the regulator is saying that we will not allow these people, who are the prime self-cert borrower, to access mortgage finance on this basis. Utterly ludicrous and completely self-defeating.

    I await the next stage of the MMR with the same degree of trepidation that EastEnders actors must be feeling about this week’s completely live episode. It is in real-time and anything can happen, mistakes in all likelihood will be made; however, with such risks come rewards, unique experiences and greater satisfactions. We would not want the BBC to cancel the live show because someone may potentially forget their line, neither do we need the FSA to regulate in a manner which aims for perfection but ultimately causes the market collapse it was trying so hard to avoid.

  9. Not that Hector Sants gives a toss about anything that any of us out here might say. He’s got his sights on the next high flying job paying £300,000 or more a year for a three day week and then a knighthood. A knighthood!! For what? In India, those of the lowest caste are called the untouchables, whilst here in the West it’s those with the best connections who seem to be untouchable.

    Just one thing though ~ regulation has achieved a lot in terms of weeding out the cowboys, spivs and sharks. Until about 20 years ago, most financial advisers didn’t even bother with a FactFind prior to selling a product, let alone documenting their recommendations by way of a suitability letter, so where we are now surely has to be better than those old days.

    What still needs attention though are the banks, followed in short order by a major overhaul of the current regulatory system. A level regulatory playing field would be a good place to start, but there seems to be little prospect of that in sight, does there?

  10. Hector took on the thankless task of pandering to the whims of immoral politicians, bankrupt bankers and moaning advisers.

    I will remember him as someone who was prepared to meet and listened to someone who used to work at the coalface. Quite why I bothered to speak up for advisers when the future looks dim for them is a moot point, particularly when you consider that support has been so poor and with many cuckoos in the nest who all thought this ‘representation’ business was a source of income. If I have learned anything form this battle between the regulator and the regulated it is that you cannot please all of the people all of the time and you certainly can’t please most of them at all, ask Garry Heath.

    There are plenty of loud and highly opinionated people out there who refused to support IFADU, some were within the ‘ranks’, others spend most of their time writing articles similar to the one above.

    In my ever so ‘umble opinion you have regulation because you need it, that means all of you, fees, commission, professional, nutters.. everybody. If you want a better regulator you need to stop moaning and do some talking because there is no time like the present.

  11. Hector, were you afraid, very afraid even, of a sinking ship?.

  12. Tickets for Hector’s ball – a dance, or a raffle?

  13. Evan,

    Interesting you mention Garry Heath.

    According to that Lumsden chap his operation is now a top 10 IFA consolidator.

    Talk about hiding your light under a bushel.

  14. Evan

    Who is listening?

  15. My understanding is that if we turn back the close to pre regulation, people had more protection, more pensions and more savings.

    Whilst yes their was a lot of commission selling going on and some products were second rate, that is the real world.

    Are we really that better off for all the regulation I would ask all to seriously consider this.

  16. Incompetent Regulators Awards Team – what are you on?

    You’re comment that “IFAs should not be regulated” just demonstrates the one and only thing you care about – yourselves.

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