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How hand of fate can alter our goals

Last week saw me in my home town of Glasgow for the Champions League final. When news of my success in applying for tickets on reached me, Manchester United were still in contention and the temptation of selling was not inconsiderable. But when United met their end, I watched the value of my tickets – cited by many as being worth 20 times their face value – go into freefall.

Market conditions had changed and I accepted this without question.

Some time ago, the ABI&#39s Mary Francis referred to the FSA as the “Provisional” wing of the Consumers&#39 Association. Observing the recent ABI communication on endowments, you could be forgiven for wondering whether the ABI is the “Real CA”.

Before anyone suggests that I am of the myopic no-one-ever-missold-an-endowment gang, let me reassure you that I concede that endowments have steadily become a less than appropriate way to repay a mortgage, given recent market conditions.

But the ABI has made no attempt to put the other side of the argument concerning historically low interest rates or expressed the shortfall in today&#39s terms.

If the rapidly changing market in football tickets is understood by many of the public, why can they not be expected to understand a change in investment market conditions?

I admit that this article is a bit of a follow-on from my last column where I bemoaned the lack of an effective lobby regarding the value of financial advice.

The ABI is enthused by advice provided at a low cost for those with less than average earnings yet presumably with similar liabilities as with the other extreme of the market.

I am not convinced that many providers have realised that the music has started again and they need to move on. Far too many providers believe that the changes from CP121 will occur in a format which will allow them to carry on the way they have done for the last 200 years or so.

The endowment issue forces me to conclude that the easy target remains the adviser – the adviser who had no input on product design, on product charges or on investment strategy (or lack of one) to which these products were subjected.

In short, I fail to understand why the actuarial profession has not been brought to account. After all, who set the product charges and deemed them workable? Who set the premiums based on anticipated investment returns and who, in many cases, had direct involvement in setting investment strategy?

The adviser had no option but to defer to the professional actuary who now sits on the sidelines waiting for the next industry review.

Perhaps it is the imminent end of the pension review that is causing this review by capitulation. Whatever the drivers, the move to provide low-cost advice seems to ignore the fact that the fixed cost of providing any advice remains the main culprit.

The ABI must not fall into the trap of meekly accepting the call for a review of endowment sales. It should be there to provide the balance in the arguments, which seem to be based on the concept that the public have the right to expect nothing in the investment world to be subject to change.

Given recent suggestions in the consultative paper issued by the FSA on pension projections that we consider stochastic illustrations, this seems to be at odds with that premise.

But then, if nothing changed, United would have made it to the Champions League final. Change is essential and inevitable. The ABI would do well to remember that.

Robert Reid is principal of Syndaxi Financial Planning


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