View more on these topics

Long-stop cause unlikely to push the right political buttons

Graham-McMillan-MM-grey-250x255.jpg

As someone who runs an SME myself, I can totally understand why IFAs are keen to see a long stop introduced. Facing the long-term liabilities poses a big risk. Under the Statute of Limitations other professions are protected by a long stop, so why not IFAs?


If it were a different sector, engineering, manufacturing, retail or farming for example, then there would be a chance this is a battle that could be won. But for another few years, while we are still recovering from the financial crisis and extremely negative perceptions of the financial services industry as a whole, it is going to be a real struggle.



E-petitions like the one posted by Tenet which calls for the introduction of a long stop can be a useful tactic to raise the profile of the campaign. But with less than 3,000 signatures to date, it still has a long way to go.



In last week’s Money Marketing, Adam Samuel suggests it would be easier to get a long stop brought in if it were simply for small firms. On the face of it that seems like an easier sell with the Coalition committed to helping SMEs and reducing the burden of regulation on business.  

But what is the cut off point? Why should someone with 11 employees have no long stop whereas someone with nine does have one? What happens when a firm grows and takes on extra employees or a firm shrinks?



Whether for small or all advisers, it is going to be very difficult to persuade the Government or regulators to provide any kind of long stop at the moment. This is partly because the financial services industry as a whole has got such a negative reputation. Governments and opposition parties are not rushing to do anything to protect the financial services industry from the consequences of anything that might be perceived to cause consumer detriment. There are votes in being tough on the industry. There are very few in helping it.



It will be positioned by opponents as helping people who have given poor advice and caused consumer detriment. It will have backers, particularly among some Conservative MPs who support the IFA sector strongly and who will probably raise it in Parliament. But Labour will accuse them of wanting to help their friends in the City. If the Government picks it up then the same charge will be levelled at them.



An alternative to the long stop could be exploring an insurance solution facilitated or brokered by Government whereby long term potential liabilities could be pooled and covered by insurance premiums that would hopefully be affordable.  

The problem for IFAs is that politically there are so many other important things right now in terms of encouraging economic growth, helping people get through a very difficult time economically and dealing with the cost of living at a time of falling incomes. Is helping IFAs who may, even if it is inadvertently, have caused customer detriment going to be a priority for politicians wanting to appeal to the electorate in advance of a general election in 18 months’ time? I am afraid I struggle to see that it will. 

Graham McMillan is chief executive of political consultancy The Open Road

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. Put us out with the law (I.e remove our rights and not those of the solicitors and accountants we work alongside) and if we are not being given the same protections under the law, then don’t expect me to abide by the same laws when someone ignores my claim to a longs too defence without explaining what the exceptiinel circumstances are that means the FOS think the case can. be looked at. Eve. the FOS rules say looking past 15 years must be exceptional circumstances.

  2. If I retire at 67, even with a longs too I would be 83 when liability expired. A good argument for IFAs funding their own pensions and not ISAs or bricks and mortar!

  3. Just a thought in passing …

    Perhaps the greatest factor in the recent financial crisis lies in the failures of the regulators to adequately regulate, and in the failure of the politicians to design a regulatory system which was fit for purpose.

    The efforts now being expended are proven testimony to the true causes of recent financial crises. They are an acknowledgment of the level of both regulatory and political failure.

    However, what if … both regulators and politicians were held personally financially responsible for those failures, and their attendant costs. Would they seek to limit their liabilities?

    How? At the absolute minimum, I would suggest, they would do so by introducing a long stop.

    It is perhaps the irony of ironies, that it is the regulators and the politicians who seek to deny to others that which they would immediately seek for themselves!

  4. Well said Mike.
    On the same note politicians are not pushing my buttons.
    Come the election I will vote UKIP, since this lot and their predecessors have not deemed me worthy to be included in the basic tenets of the democratic process.

  5. I would be very interested to know where FOS states ‘looking past 15 years must be exceptional circumstances’. I am currently fighting a case 21 years old. The client has dementia and is making things up at a rate of knots. I have kept my files but the Insurance Company that caused the problem has not and I can’t prove I am telling the truth. A longstop would be a very fair idea.

  6. Whilst I obviously support the long-stop and other aspects of the Limitation Act being applied to liabilities under the regulatory system, tactically we are making the wrong pitch.

    We should be pushing for concepts of self-regulation or regulation via professional bodies with lay members. We should be pushing for a clear statement of statutory client rights that give rise to a cause for action…and entirely different form of Ombudsman or ADR that would exist to determine causes of action and not complaints.

  7. The very first sentence of this article contains an incorrect statement (so of what value is all that follows?). IFA’s aren’t keen to see a long stop “introduced”. What we’re keen to see is the removal of the FSA’s unilateral, un-negotiated and un-consulted upon denial of a longstop. It’s (supposedly) a fundamental right enshrined in English Law.

    (To the best of my knowledge), ALL other professions, without exception, are subject to the protection in law of a longstop. The FSA’s decree effectively ignores and overrides statute.

    ONLY financial services intermediaries (before much longer, I predict, there’ll be fewer independent than restricted advisers, so we may as well start calling ourselves, collectively, FSI’s) are denied it by a pernicious regulator that enjoys a government-granted mandate to create and enforce on its own terms its own laws without regard for Statute.

    To all intents and purposes, the FSA is its own Law Maker, police force, investigator, judge, jury and executioner. Do we need an IROC? Hell yes, and one should have been created 20 years ago.

    For FSI’s, the rock and the hard place between which we find ourselves are getting ever higher, harder and closer together. Perhaps the only escape will be to retire south of the equator.

  8. The overriding of Statute by on the part of the FSA by denying intermediaries the protection of any longstop is plainly another example of its sustained campaign of malicious persecution, despite Hector Sants’ tepid denial before the TSC back in March 2011. How can anyone possibly accord any such denial the slightest credence?

    In the vest majority of cases, Financial Services Intermediaries are being driven into the ground and put out of business not as a result of advice that can be deemed defective by any normal criteria. Barely 1% of all complaints referred to the FOS are attributable to independent and restricted FSI’s, which surely tells its own story. 99% of us are the good guys, but the FSA simply refuses to recognise the fact and presses on with the imposition of ever more rules and red tape.

    The principal reasons for FSI businesses being destroyed left, right and centre are:-

    1. the FSA holding them responsible for the consequences of its own derelictions of duty and

    2. PI insurers seizing on any opportunity not to honour the cover for which they’ve been all too to ready to charge the premiums.

    The latter stems from the former, having started with the Pensions Review, an evil after-the-event witch hunt if ever there was. Since then, things seem only to have got worse, with the FSA as unaccountable as ever for its actions. Before much longer, operating as an FSI will have become so toxic, so risky to one’s financial and physcological health and so impossily burdened with regulation that people just won’t want to do it any more. Many already don’t. Many of those who remain (and I’ve spoken to several) are just hanging on until they can afford to retire and get the hell out of what has become a horrible, persecuted place in which to try to make an honest living.

  9. As usual, Julian makes a number of pertinent observations.

    The impact of regulation with its concomitant cost &, pressures plus the inexorable retro-creep of its satellite harpies – the FOS and the FSCS – makes this a dangerous place to inhabit. A bit like sleeping outdoors in Angola.

    When will the regulator fess up and either state, unequivocally that it wants to rid the country of these horrible little advisory firms or, alternatively, recognise the horrific impact of its policies and lighten up?

    Over to you, Martin Wheatley.

Leave a comment

Close

Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com