Unlike David Icke, I have never been one for conspiracy theories. However, the recent round of announcements by the Treasury and other industry bodies proposing even greater regulation did give me cause to pause for thought.
But after delving yet again into what is becoming my most favoured website to download the detail of the latest Treasury proposals, I realise it is not conspiracy but rather a dangerous mix of ignorance and good intentions.
The Treasury paper, Standards for Retail Financial Products, highlights this only too clearly. The report states that consumers rarely shop around for even the simplest financial products and, once they have made a purchase, are reluctant to switch providers. It also draws attention to a general lack of understanding of charges. Furthermore, a significant number of individuals – some 35 per cent of the sample – believe that past performance is a guide to future performance.
Against this, it cites that, when people have the confidence to choose products and services for themselves, they often do better than those who took advice. The example used to back up this statement is the surrender rate for individuals who bought endowments. I quote: “People who were sold regular-premium endowment policies by company advisers in 1995 were at least a third more likely to have surrendered them four years later than people who bought similar products by choosing for themselves through direct-offer advertisements.”
Nowhere in the report is there any information on how those individuals who sought the advice of an independent financial adviser fared.
True to form, the conclusion drawn is that those who do it themselves do best. Therefore, more effort should be put into consumer education and action taken to foster an environment where financial information is readily available in an easily understood form.
Enter the Cat, the Government's quality mark for certain financial products. We all know what a useful aid to consumers in their purchasing decisions it has proved to be.
Undeterred by the somewhat less than enthusiastic response from the industry to this clawless kitty, the Treasury is proposing inflicting even more of them on us, by far the daftest of which must be a Cat standard for healthcheck financial advice.
Following on from its drive for DIY product purchase, the Government and bodies such as the Consumers' Association think it would be a good idea to offer a fact-finding advice service to identify an individual's needs and then send them off to purchase the product off their own back.
What aid do they have to assist in their product choice? The Cat, of course. Anyone familiar with internet acronyms will understand when I say that, by this point in my reading of the report, I was ROFL (rolling on the floor with laughter). So, the difficult part of the equation is the identification of financial needs whereas product selection is easy for the average consumer? I doubt any of our clients would agree, even if armed with a whole alley full of Cats.
But it gets even better. I would urge anyone starved of a laugh to download this paper now and read pages 40 and 41. I assure you they are good. The report goes on to suggest that a pure advice service need not cover the full needs of the consumer but rather could focus on specific areas. Any good IFA will tell you that advice should be personnot product-specific. Isn't asset mix an important part of planning?
My personal favourite, however, has to be the likening of the purchase of financial products to that of prescription eyewear and comparing the role of adviser to that of optician.
The analogy does not quite work. An optician not only identifies your specific eyesight problem but will also tell you the precise specification of the lenses required to correct it. All that is left for you to do is choose the style of spectacle frame that most suits you or, in the case of contact lenses, the ones which are most comfortable to wear.
If this were translated to financial advice, it would be akin to the adviser identifying their client's needs then recommending the most suitable products for their specific circumstances. Sound familiar?
Yet again, a report has been produced which fails to take account of what is by far the biggest distribution channel for financial products and the value of the service it provides to the consumer, coming up instead with a half-baked proposal aimed at helping the consumer make informed choices.
Taking again the comparison with the purchase of eyewear, I have my own solution. Why not produce policy documents in a large range of textures and colours and let your clients pick their favourites? After all, it fits the logic.
Donna Bradshaw is communications director at Fiona Price & Partners