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Letwin is right to question flawed logic of the FSA

Although I do not support his party, I think Oliver Letwin was right to question the role of the FSA.

The legislation going back to 1986 was always flawed because it focused on regulating advice.

This sounds wonderful but it can give consumers the impression that risk is transferred to the adviser on the basis that if a loss is made then the product must have been missold.

This was never the intention of the legislation but it is very hard for consumers to see how a product that loses them money could be appropriate.

If advice is to be regulated, the FSA, the industry and consumers have to accept that until we can design a time machine, the risk of making the wrong decision can never be eliminated.

Advisers can help their clients make an informed decision but they cannot guarantee that it will always be the “right” decision.

There also needs to be clarity on the sharing of responsibilities in the advice process.
The client has a right to get accurate and unbiased information from the adviser.

In return, the client must accept responsibility for the decision whether to accept or reject the advice and the financial consequences that follow.

The test for any complaint would be whether the adviser misled or misinformed the client.

The current regulatory system is also an example of the best being the enemy of the good. Everyone would agree that saving is a good thing.

There are simple flexible products to offer customers. On balance, the benefits that would accrue from saving into one of these far outweigh the potential disadvantages.
Why then, do we make it difficult to sell these? Why is it a simpler process for a bank to sell someone a personal loan which puts them into debt than to save £50 a month into an Isa that has the potential to create wealth?

John Trayner St Ives,Cambridgeshire

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