It is vital that the retail advisory end of financial services engages now with the Government. In both the savings and the protection areas, private provision needs to replace the retreating welfare state. The coalition is keen to reverse the trend towards a growing unemployable underclass and to stop the fashion for using sickness benefits as a proxy for unemployment benefit.
To date though, the previous Government’s mendacious love of debt has forced this Government to focus on banking reform. The previous error has been replaced by an intention to encourage savings, at least once this initial period of recession avoidance is over. But whereas the current Treasury focus on the banking sector is rightly negative, the rest of us have not screwed up the country’s economy and need now to make our positive case very loudly if we are to be heard. We need to ensure the Government realises the banks are not financial services, they are just a fairly dysfunctional part of it.
Beyond them is a commonwealth of many different businesses committed to encouraging prudent financial behaviour. A legacy of clumsy regulation and poor corporate governance inspired by the major insurers has meant most of the best of this sector are comparatively tiny businesses but there are a great number of us and our potential to grow rapidly is far greater than that of a few tarnished monoliths. I would suggest the key difference between these thousands of smaller businesses and the banks is that a retail banker’s career is not dependent on how well he does for his clients, it is dependent on how well he does for his employer. It is that simple structural truth that renders banks such dangerous firms to do business with. The other end of retail financial services is able to build employment structures that mean the better an employee does for their clients the more their career progresses as the long-term capital value of their employer grows.
I do not think the current Treasury team has this view at all. I think it thinks that our sector is a bunch of mavericks best pruned back to a core that can do little harm if it sells only approved simplified products. I think the very well connected and funded and powerfully self-interested voices of the FSA and the British Bankers’ Association are the voices that Mark Hoban and his team recognise and can relate to. However, having heard Gordon Brown admitting he got it wrong in creating the FSA, I expect the current Treasury team is now more open to learning from those who have successfully endured 34 years of vacillating regulation and banking misselling.
What is needed to answer this latent desire is a clear practitioner focus on careful and positive lobbying. This must necessarily be simultaneous with, but separate from, the current fight to stop the RDR unnecessarily thinning the numbers of those who put the client just ahead of their need for short-term profit, rather than well behind it. While that factional fight can continue, the longer-term cause needs to be separately explained. It is that the myriad small finan- cial services business form a veritable army, which, given encouragement and public support, can get individuals taking responsibility for their own financial affairs in a way no Government or bank or website ever could. We are a resource well capable of helping the Government in its biggest financial fight. We just need them to see how easily it could be to get us doing just that.
Tom Baigrie is managing director at Lifesearch