Which explains why, like a feudal vassal paying homage to his liege lord, I popped in a couple of weeks ago to see Paul McMillan, the new editor of Money Marketing.
We didn’t have much time to talk as Paul was in the final throes of putting that week’s edition to bed before dashing across town to attend the CII president’s dinner. Had I but known the furore soon to be caused by the guest speaker at that same dinner, I would have tried to wangle myself an invitation too.
The speaker was Ron Sandler, former chief executive of Lloyd’s insurance market, then director and chief operating officer at NatWest before its takeover by RBS, latterly the Government-appointed chairman of Northern Rock, after that bank’s spectacular implosion in 2007.
Immediately after his speech, I received several emails from people who were mostly appalled but in one or two cases rather gleeful at the alleged “offence” that Ron Sandler gave his hosts.
Last week’s Money Marketing summed it up rather well. According to Paul himself, the speech came over as that of “a well-rehearsed lawyer defending a client who is guilty as sin” and “left a sour taste in the mouths of many guests”.
Hardly surprisingly, Sandler’s comments left some advisers rather upset. SimplyBiz chairman Ken Davy declared the speech to be “very disappointing” in its defence of banks.
This, presumably, is the same Ken Davy who was once chairman of the IFA network DBS Financial Management, a company which attracted three regulator’s fines totalling £565,000 by the FSA and its predecessor the PIA .
Ken’s disappointment was matched by Whitechurch Network managing director Ian McIver, who was quoted as saying that he was “unsettled” by the fact that such criticisms of the IFA sector had come from Ron Sandler: “He is sitting there earning a salary out of Northern Rock, which played a huge part in the crisis and so it sticks in the throat.”
McIver obviously felt that Sandler, parachuted into Northern Rock to sort out the mistakes of his predecessors after they ran the bank into the ground, ought to be paid nothing for doing the job. Clearly, he believes in visiting the sins of the fathers of their children.
If so, I wonder what McIver makes of the fact that his own company Whitechurch Network describes itself on its website as “growing out of the compliance effort of Whitechurch Securities”, the Bristol-based IFA which, back in 2004, put into voluntary administration its business arm responsible for selling precipice bonds to clients.
As a result, customers who wanted to make a claim against the company for selling were forced to turn to the Financial Services Compensation Scheme for help. They received £462,000 in compensation and IFAs paid for that through their FSCS levy.
Now, don’t get me wrong. Anyone defending bankers in the current climate must have a screw loose. But to criticise Sandler for the fact that stakeholder schemes failed to achieve any traction in 2002 is to forget what the climate was like at the time.
Sandler was appointed to carry out a review of the savings market back in 2001 while share prices were in freefall. By the time he reported, in mid-2002, markets were still on their downward spiral. Anyone who cares to go back through sales figures for, say, Isas, will see that they collapsed throughout that entire period.
Of course, Sandler made major errors in terms of his proposals. He focused less on the advice process itself and more on the product design side. His solution was the creation of simple “stakeholder” products that could be sold over the counter by relatively untrained bank staff, with minimal advice and built-in safety warnings.
But as the FSA itself found in its regular trials, trying to do away with advice when selling a financial product will either lead to it not being sold at all or it will be potentially missold on a massive scale.
Yet Sandler’s proposal for more consumer education, coupled with better training requirements for IFAs was spot-on. He recommended that advisers’ payments should be agreed between them and their customers, with “tariff sheets” showing an hourly or fixed fee, contingent on a sale or paid in instalments.
In essence, it was Sandler’s ideas that led to the menu system that advisers use with their clients today.
That may not sound like much but in the context of the IFA sector facing potential wipe-out by simultaneous proposals mooted by the FSA on depolarisation, they were seized upon by a grateful Aifa and IFAP at the time.
By all means criticise Sandler, but try not to demonise him.
As for my visit to the editor, the answers to my venal questions were “No” and “No”.
Nic Cicutti can be contacted at email@example.com