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Moore&#39s code

It seems hard to believe but financial services was once seen as something of a backwater in the world of City journalism. Not any more. The last few years have been a time of unprecedented change for the industry – some would say that it has been in turmoil. This it is not going to stop any time soon.

Not a week goes by without the industry hitting the headlines and the news has all too often been bad. The sweeping reforms imposed by the Government would have been a challenge at any time but set against the backdrop of the equity markets being mired in the worst downturn since the Great Depression and those involved in the industry could be forgiven for thinking that they have a mountain to climb.

How the industry and the policymakers in Westminster and Whitehall proceed from here is now crucial. There is no doubt that the industry needed reform when New Labour came to power in 1997.

Scandals such as pension misselling had drained away confidence and much of the industry was still pushing outdated and poor value products. Pioneers, and they were not all opportunists such as Sir Richard Branson, had recognised the need for change but they were few and far between. The industry had become discredited and this gave the Government the impetus to go in and crack heads. While ministers such as Helen Liddell and Patricia Hewitt displayed a regrettable penchant for using the industry as a means of grabbing cheap headlines, New Labour&#39s initial approach did bring some benefits.

Pension misselling needed clearing up and it was. Isas, despite their complexity, are far more flexible than their predecessors and are much better suited to the mass market.

But as time has gone on, it has become increasingly obvious that many of the Government&#39s reforms have proved ill conceived and poorly implemented. You only need to take a look at stakeholder pensions.

It is a fine idea in practice but the structure of the product has made the effective promotion and sale of it extremely difficult. When was the last time you saw a TV ad extolling the virtues of a stakeholder pension?

It is widely recognised that there is now a huge savings gap in this country but the Government&#39s effort to address this has been hamfisted. It is far too fond of beating product providers with a stick without providing the consumer, the industry or employers with any carrot. Many hold out hopes for compulsion but that could be politically explosive.

Chancellor Gordon Brown would be better off looking at ways to persuade people to save through incentives rather than brow-beating them or forcing them.

Ministers are forever claiming that they run a listening Government. Consultation papers stream forth from Whitehall. The problem is that when the responses to those papers are sent in, the ministers and mandarins ignore what they say and do what they please. That needs to change.

The industry is in anything but robust health. A couple of years ago, it was fashionable to talk of Equitable Life as a unique situation, an outrider brought low by a freakish set of circumstances. No longer. There is now a very real danger that others will fall into similar difficulties.

Badly conceived and silly legislation could make a difficult situation downright impossible. Caution should be the watchword both for ministers and the FSA.

The industry, too, needs to take a careful look at itself. There are far too many life offices that have taken cavalier business and investment decisions which could come back to haunt them and their policyholders in the months to come. Life insurers used to make a virtue of being boring. They should do so again.

Stockmarkets will probably recover at some point but the recovery is likely to be slow. It will be some time before we see a return to the bull market of the late 1990s and that may be no bad thing. What life insurers need to remember is that if they look after their customers, their customers will look after them. It is a simple concept, often forgotten.

If the insurers were able to make the consumer their ally and be seen to be offering solutions rather than problems, then the Government would have to listen to them. As for IFAs, they too face challenges. IFAs are adaptable creatures. People have been predicting their demise for years. It has not happened and I do not believe it will happen. There will always be a need for quality independent advice.

But IFAs need to be sensible. Life offices have been pumping money into the sector. While this could bring many benefits, brokers should must never forget that it is the client that ultimately pays their wages.

This will be my last column for Money Marketing as I prepare to leave full-time financial journalism to take up a new role as director of Leadenhall Communications. Despite all the challenges the industry is facing and despite all the criticisms I have made, I believe that it has made improvements over the past few years.

These can and should be built upon. There is enough talent in the industry to do that. Finally, I would like to use this opportunity to wish the best of luck to all Money Marketing&#39s readers. It has been a blast.


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