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Looking back in the review mirror

Last week&#39s announcement that Ron Sandler will conduct the review of

retail financial services known as the &#39son of Myners&#39 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&#39s 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&#39s 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

Disclosure Review

“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

features documents.


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 –

Polarisation 2

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

and FSA.


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&#39s review although, interestingly, the LE analysts reported

they could find no evidence of commission bias among IFAs an area now under

investigation in Sandler&#39s son of Myners review.


Myners Report

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&#39 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

policyholders&#39reasonable expectations.

2001 – ongoing

FSA disclosure review

The disclosure review&#39s focus is likely to include the charging structures

of financial products, key features documents and possibly how advisers&#39

remuneration is disclosed.

2001 – ongoing

&#39Son of Myners&#39 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



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