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