There seems to be a common theme evolving for the industry. A lengthening list of names from Robert Maxwell to Independent Insurance and now Towry Law seems to suggest that thorough external scrutiny by professional firms has proved to be less than robust in the cold light of day.
Despite increasing requirements for record-keeping and additional external monitoring, we are never going to prevent such situations from occurring.
But these cases, particularly the two recent ones, should not have been allowed to happen.
Then again, where is the incentive to carry out the job effectively when someone else will pick up the pieces when things go wrong and, more to the point, provide compensation at everyone's expense?
With Maxwell, it was not so much the costs of compensation but more the gargantuan increase in bureaucracy, which we can see has reached a point where the final-salary pension is now a dinosaur on the road to a slow and painful extinction.
At present, it is too soon to know the outcome of the Independent Insurance debacle for the majority of IFAs who have no general insurance business. But, for those involved in the sector, it has certainly been a trying few weeks and the costs are beginning to show. One of my clients, a small to medium-sized company, has incurred a £20,000 cost as a direct result of this insurance company's demise.
For the IFA, it is the Towry Law case that is uppermost in our minds.
While none of us is privy to the negotiations that have taken place, what we see reported seems a quite bizarre set of circumstances that at face value are going to add considerably to sizeable payments to compensate investors.
While we are all in business and accept the commercial risks that are thrust upon us, it does seem that there is a one-way street when it comes to those who are expected to pick up the tab where investors' compensation is concerned. We are seeing in different areas the implications of the compensation culture that apportions blame anywhere there seems to be a source of funds that can be accessed to pay out.
I do not think anyone objects to meeting genuine compensation liabilities but a situation where there is open-ended underwriting to cover everyone else's mistakes is not conducive to increasing the standards of advice.
With present stockmarket conditions and annuity rate levels, the thrust of compensation claims for phase two of the pension review are at the higher end of expectations and, regrettably, this is tipping a number of IFAs over the edge as they are unable to meet these costs. But these are not on the scale of the £30m that is quoted for the Towry Law liability.
At the very least, a full and open enquiry must take place. Surely, there are indemnities entered into during the whole acquisition process? It does seem strange, to say the least, that shareholders are not being called upon to meet their dues, particularly where substantial sums of cash are changing hands. A full independent enquiry would at least bring all the facts out into the open.
Market forces bring about commercial and financial risks but to add to them with what seems to be unfair market risk cannot be acceptable. We already have sufficient uncertainties with the arrival of N2 and its costs, which have to be budgeted for, together with the impact of revised regulatory requirements. There are enough moving goalposts without new uncertainties being created.
Nicholas Conyers is a director of Pearson Jones