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Make yourself heard

My father always said to me that the only way to move things in the direction you prefer is to get involved. There is no point in muttering quietly and yet many of us are doing just that.

Perhaps we are punch drunk with all the recent Financial Services Compensation Scheme claims coming from firms other than IFAs such as Keydata or stockbrokers which punted high-risk options. Just how they are seen to be IFAs I know not.

I have to admit that I lost faith in the FSCS when it assumed that Sipp members could claim when the Icelandic banks got into trouble.

Importantly the investment was in the name of the Sipp trustees but they ignored that. We should have told them they were wrong. If we had, their extrapolation that Keydata and execution-only stock-brokers were IFAs would not have succeeded so easily.

With the prospect of the average FSCS contribution going up by a factor of three, we have to ask, why are the definitions so loose or, worse still, so liable to casual interpretation?

With all the hoo-hah over bankers and their bonuses and the need to spread them over time so they relate to genuine profits, surely its equally important that those at the FSCS should only receive bonuses, if they need them at all, linked to several key performance indicators.

For example, they need to demonstrate some due diligence enabling them to determine who is to blame for a collapse. If the guilty party is the regulator, then the current cashflow from fines could provide the source of contributions. Where the majority of a firm’s business comes from other advisers, then, like it or not, that firm is a provider and falls into their pool. A contribution should be sourced from IFAs who sold the product but capped at the commission they received for the sale.

The current system was designed in a hurry but as we move to adviser charging, is it not time to reconsider a product levy? After all, what other product gives the consumer a guarantee that runs for more than 12 months?When someone wants long-term protection they have to buy that warranty. The consumer bodies often cite these warranties as being overly expensive, yet they still sell in large numbers which proves that people see long-term warranties as an extra, not a default option.

The news that the FSA seeks to control the very elements of the mortgage world that can help people get started or get over problems is not welcome. In the US, the ability of lenders to repossess is linked to the fairness of contract and, in many cases, courts are siding with the borrower. Equally, the rates being applied to exiting plans needs closer inspection. If people seek to improve their housing, they need to be helped to do so, not hindered.

I understand that caveat emptor, or buyer beware, is seen to be too onerous on today’s consumers but to leave the availability of mortgages at the whim of the regulator means that the FSA is giving advice by de facto. Now I know they will say ’no, we are guid-ing people’ but that is rubbish as every attempt to inform the public has shown the defin-ition of advice lies with the clients and no one else.

Robert Reid is managing director of Syndaxi Chartered Financial Planners

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. So, the FSSC is to ‘restructure’ as a charity, BUT with a ‘separate commercial arm’. Thereafter, the annual accounts will be open to scritiny (on the Charity Commision website), but file abbreviated accounts for the ‘trading’ company wher all the 5 series BMW’s and jollys (did you see pictures of last year’s?) will be hidden. As any Tommy Cooper fan will tell you, the old ones are the best ones!

  2. “Where the majority of a firm’s business comes from other [?] advisers, then, like it or not, that firm is a provider and falls into their pool.” Yes, we know that Rob and it is on that basis that Regulatory Legal has secured permission for a judicial review of the FSA’s patently incorrect determination that KeyData was an intermediary as opposed to a provider. Why, in the face of all evidence to the contrary, would the FSA have made such a determination other than as yet another malicious opportunity to clobber the intermediary community yet again?

    “If the guilty party is the regulator, then the current cashflow from fines could provide the source of contributions.” I disagree. Restitution for blunders on the part of the regulator should come firstly from its bonus pool and, once that is exhausted, from its salary roll. Oh no, all FSA directors and staff would howl, that would be unfair. Why? If you lot screwed up then it’s you lot who should pay for the consequences, not us out here. And, having established that as the proper source of funds for restitution, the FSA should be prohibited from adding an equivalent amount to the following year’s levies. But, unless or until the NAO or some other overseeing body is appointed to regulate the FSA, how will that ever happen? It won’t, because, in matters of finance, the FSA is accountable to no one. The FSA unilaterally determines its levies and anyone who objects is given a stark and simple ultimatum ~ pay up or pack up. It’s all about as wrong as it could possibly be. The FSA screws us with impunity. Our only defence is by way of a hugely expensive judicial review and there are only so many of those that we can afford, even collectively. The coffers of the FSA, by comparison, are virtually limitless. Whatever it needs or wants, the FSA just raises by way of additional levies and all Adair Turner does is to call for more of everything ~ more staff, more power and more money. There’s never any question about reviewing how well or otherwise the FSA utilises its present resources. Just authorise us to charge more, more, more and eventually we’ll do better. It’s called Black Hole Syndrome.

    I wonder if any other regulator across the whole of the EU is so universally reviled and resented as the FSA? Answers on a postcard please.

  3. There are bits of Julians post I agree with and bits of Robert Reid’s. I think there is merit in as Mr Reid said including the fact Keydata should be deemed a provider and not an intermediary and”A contribution should be sourced from IFAs who sold the product but capped at the commission they received for the sale.” I would go as far as to say it should be a multiple of the commission/fees earnt in connection with the investment and advice so that it is not just a loss equal to the earnings, but a slightly penal amount, perhaps as high as 4 times the commission/AR/CAR received. The problem is, as we now find out, many PII insuers are now wriggling out of paying claims against the adviser, despite the fact the excess is penal enough in itself, without the fact the claims are now appearing to be uninsured.
    The return on the Keydata plans was not massively higher than interest rates on deposits at the time, but was better than that and PLAs for clients who wanted/needed income and placing a proportion of up to a max of 20% of a portfolio for a client seemed sensible at the time.

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