Last week's announcement that Ron Sandler will conduct the review of
retail financial services known as the 'son of Myners' inquiry has had a
mixed response from the industry. From many, it elicits groans at the
prospect of yet another in a long line of reviews, inquiries and
commissions that have dogged the industry since the early 1980s. Corey
Boles has compiled a list of the most significant reviews that have kept
the industry on tenterhooks over the last 20 years, with their main
recommendations and the resulting action.
The Gower Review
In 1982, Professor Jim Gower found that investors needed protection from
dodgy dealers in the equity markets.
The irony was, despite Gower's wide ranging conclusions about collective
investments which led to the Financial Serv-ices Act 1986, he was only
asked to look at direct equities. He said: “The investor is entitled to
some protection from ignorant fools as well as convicted crooks.”
The Office of Fair Trading – Polarisation
This was the OFT's first stab at polarisation and the rulebook that
resulted from the FS Act 1986. Not for the last time, it concluded that
polarisation was anti-competitive and must go. This time the body was
overruled by the Government.
Securities and Investment Board (SIB) -Retail Regulation Review
SIB, the regulatory predecessor to the FSA, reviewed much of the existing
rules, including polarisation, disclosure and standards of advice. The
result was many of the conduct of business rules that still exist today.
Sir Brian Hayes – The Need for a Single Regulator
Hayes was asked by SIB to look into the case for a single financial
regulator. The outcome of this review was the Personal Investment Authority.
SIB – Pension Misselling Review
Following the pension misselling debacle, SIB was forced to put together a
major rescue package for those affected. The true significance of this
review was this was the first-time business was looked at retrospectively.
SIB – Life Insurance
“The disclosure taskforce” was aimed at providing consumers with full
details of how much the purchase of a product would cost them. The result
was the introduction of commission disclosure, reason-why letters and key
PIA – The Evolution Project
This grandly named project looked at what level of information and
understanding the consumer needs when buying financial products.
It touched once again upon disclosure as it is closely intertwined with
consumer understanding. Its main aim was how to move away from the
prescriptive and detailed regulatory regime to a less onerous regime.
However, the plans were swallowed up after the new Labour Government
announced the formation of the super-regulator with the formation of the
Department of Social Security -The Future of Pensions
The new Labour Government felt compelled to make the now defunct
Department of Social Security headed by Alistair Darling take a serious
look at the pension industry following the misselling debacle and looking
forward at future funding of pensions due to demographic changes leading to
an ageing population. The result was the introduction of stakeholder
pensions and the 1 per cent world.
Office of Fair Trading –
Taking its second look at polarisation, the OFT recommended that
investment advice should be depolarised, to near universal scorn. But more
significantly, the OFT ruled polarisation was significantly
anti-competitive, it had an attentive audience, most notably the Treasury
The Cruickshank Report
Don Cruickshank was asked by the Treasury to look into competitiveness in
the banking sector.
Like others, he overshot his remit and came out with a very comprehensive
and damning report on all aspects of the banking sector.
For IFAs, the most significant recommendation by Cruickshank (which has
been completely ignored) is not to embrace charging caps.
The Treasury has done the complete opposite and instead is in the process
of introducing Catmarked products in virtually every sector of the market
with the principal feature being a cap on charges.
London Economics -Report into Polarisation
This now defunct economic consultancy was asked by the FSA to look into
polarisation on the back of the OFT findings. It produced, what was thought
by most to be a very good economic report that took no interest in what was
actually happening in the real world.
This really paved the way towards scrapping polarisation as part of phase
one of the FSA's review although, interestingly, the LE analysts reported
they could find no evidence of commission bias among IFAs an area now under
investigation in Sandler's son of Myners review.
Gartmore chairman Paul Myners was asked by his friend the Chancellor to
look into trends and distortions in institutional investment market,
particularly, investment habits of pension funds. Again going beyond his
remit, Myners' most relevant recommendation for IFAs was to establish
another review, looking at what was happening in the retail side, in
particular commission bias on product sales, charging structures on
products and levels of competition.
FSA – Polarisation Phase One
Stakeholder pensions and direct-offer advertisements were removed from the
polarisation regime in a possible sign of future things to come.
While the regulator insists that everything is still up for grabs, the
future for the current regime looks ominous, with providers and network
beginning a rush for distribution to stand them in good stead in the event
of the FSA introducing multi-ties.
2001 – ongoing
FSA with-profits review
The with-profits review is expected to be looking at issues such as
transparency, how investment and bonus decisions are made and the issue of
2001 – ongoing
FSA disclosure review
The disclosure review's focus is likely to include the charging structures
of financial products, key features documents and possibly how advisers'
remuneration is disclosed.
2001 – ongoing
'Son of Myners' review
The much anticipated and slightly redundant look at the retail side of the
industry begs the question – what can Ron Sandler discover that has not
been mentioned already?
2001 – ongoing
FSA – Polarisation Phase Two
Expected late this year, this most serious of reviews could see
polarisation and along with it the concept of IFAs as they presently exist