If you had told me before Equitable's downfall that they would fall from grace as spectacularly as they have, I suspect I would have been somewhat sceptical. Of course, none of us operate with the benefit of hindsight, so it is not surprising that I could not have predicted recent events.
A lot of our business is fee-based, so we could easily have recommended some of their products. But what was on offer did not shine as brightly as the likes of Standard Life, Scottish Widows and Clerical Medical – to name just three good alternatives. Over the years, we have seen real performance with real clients showing that Equitable Life was not the best.
We saw no reason to put them forward with free assets as low as they were (we have plotted them ever since starting The Analysts) and with the hurdle of them not really wishing to deal via IFAs.
And frankly, their tiresome and dishonest brag that they do not pay commission to middle men was all we needed not to recommend them. I believe this arrogance was their downfall and, it seems, continues to be so as they flounder around trying to save what is left.
Had they had their wits about them they would have approached the problem from an entirely different angle. Could they not have employed a little imagination like other offices and do what was obvious to most of them – particularly those with guaranteed annuity rates?
One such office to “think the unthinkable” was Scottish Widows. It seems more than luck was employed as they realised a partner was required to see them through the most radically changing period in history. I wonder if the Widows saw the combination of stakeholder pension and guaranteed annuity rates as the final straw, and that to survive meant creating critical mass, and filling all available distribution channels?
What Scottish Widows did by teaming up with Lloyds TSB must have seemed drastic to the likes of Equitable – and indeed we thought so as well. But they explained their moves carefully to us and made sure we understood and, importantly, had our support.
Their foresight has resulted in an office that will survive (I suspect) and an awful lot of happily demutualised clients. Furthermore, they can uplift open market options dramatically to everyone's great relief.
As Scottish Widows go from strength to strength, Equitable Life continue to sink deeper. Even now they are trying to bribe their way out of trouble with the non-Gar policyholders being asked not to complain at the now obvious mis-selling that took place.
I have to take a deep breath when I think about this. What the regulator is saying is that it is OK to have missold, as long as you give everyone some money – whether they have a case or not. They are saying you can buy your way out of dishonesty as long as you have a good excuse.
There surely has to come a time when Equitable admit defeat. It is starting to undermine the credibility of our regulatory system that is now paying dividends with increased consumer confidence.
I would like to think this is just in relation to Equitable Life's unique situation, but I am not so sure. Have a look at the Winterthur decision recently. They have been fined and forced to put policyholder funds aside to pay for their recent sales lapses. But the fine is “low compared to others that may be announced in the future” – because they have been so helpful.
Reading various commentaries and quotes on the subject, it all sounds a little like Winterthur have taken a commercial decision based on their balance book, rather than what is right or wrong. Could they be thinking that it is cheaper to “pay off” the problem rather than argue?
If Equitable had enough in its coffers to buy off the problem, you can bet they would. But they do not, so this is the result. Perhaps if Winterthur were in a similar predicament, they would do likewise?
Of course they would never admit it – we all know that the life offices concerned with the Pensions Review have worked out it is easier, quicker and cheaper to just pay up rather than fight for what is right. Some IFAs have no such luxury, which is why it will take longer for them to finish.
It might seem easier all round to just split the money put aside for possible compensation payments (£46bn so far) between every “eligible” policyholder in the land and be done with it. We could call it the “crystal ball contingency fund”, which would leave us free to get on with the important things in life.
Tom Kean is compliance officer at The Analysts