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Neil Liversidge: Gambling or investing? The balance is wrong

The disparity between the burden of regulation for investment advice and the low oversight of gambling or payday lending needs to be addressed.

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If Meyer Lansky, Benjamin ‘Bugsy’ Siegel and Charles ‘Lucky’ Luciano were reincarnated in the UK today they would never choose organised crime as a career.

Successive governments and their corporate paymasters have created an environment vastly more friendly to loan-sharking and gambling than ever existed in their time, even in Vegas and Havana. The facility to have their customers gamble away their pay cheques online using credit cards and to promote the same by TV advertising would surely convince all three that they had landed in gangster heaven.

With no FBI to worry about and no risk of finding themselves on the business end of a Thompson, what better guarantee could there be of a high life for a lowlife?

Gambling and debt are an evil mixture. Seen as a cause of misery in society for millennia, the great religions historically prohibited or at least restricted both to some degree.

Harking back to such thinking may sound very Old Testament but religious doctrines are, in reality, man made and often had good practical reasoning at their foundation.

A Jewish friend of mine once explained to me that their dietary laws had come about originally because shellfish and pork were likely to cause food poisoning in the pre-refrigerator Holy Land. No doubt a similarly wise Hebrew mind realised that having the weak gamble away their shekels instead of using them to buy food for the kids was also a bad idea. Likewise they probably figured that letting one man tempt another into usury by encouraging him to covet his neighbour’s ass would not make for a peaceful and harmonious society.

I have friends who are or have been MPs in all three main parties. Most MPs are genuine people, good men and women on all sides doing a largely thankless job.

What were they thinking, though, when gambling laws were liberalised and payday loan sharks started colonising our high streets?

I knew the Labour Party had lost what remained of its soul when it had the bright idea of promoting ‘Super Casinos’ but even they pale into insignificance compared with online gaming.

The media is no better. Tabloid hacks love to use the clichés that stockmarkets are ‘casinos’ and that investment means ‘gambling on risky shares’ but their scribblings all too often sit cheek by jowl with ads for the likes of Wonga and Sky Vegas. So perfectly is our politicians’ blind spot mirrored in the fourth estate.

Contrast then the barely-discernible regulation of gambling and lending on the one hand with that of saving and investment on the other.

There has to be something wrong with a system that requires me to provide half-a-kilo of written justification to a client wanting to make a modest-sized investment when any number of bookies can and will take the same amount of money from him in an instant, no questions asked.

I do not seriously expect the regulation around investment advice to be much liberalised but with the FCA taking over consumer credit licensing, might a similarly strict regime be imposed on lenders?

An outright ban on using debit and credit cards for any kind of gambling would be a good start along with limits on the interest rates that lenders can charge. Don’t hold your breath.

Neil Liversidge is managing director at West Riding Personal Financial Solutions

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Another good article form Neil, although it is very tongue in cheek I suspect, as nothing will fundamentally change overnight.

    The methodology within some sectors is one of smash and grab opportunism, ours has allowed itself to be beset by the same over the years (we know who the culprits were) and so we are living under this shadow and that is why the very areas about which he writes, will eventually fall under closer scrutiny and a clean-up operation, but alas, much like our sector, it may be a case of the stable door being closed after the horse has bolted!

  2. I’m right with you Neil. A friend and colleague to whom I spoke yesterday on this very subject expressed the opinion that, because of any lack of restraint, regulation has become so absurdly OTT that all and any sort of practical balance has been completely lost. Intermediaries are stuck in a quagmire of seemingly endless and endlessly increasing red tape in an attempt to tick every compliance box and render their recommendations bomb-proof against future challenge.

    Fees for advice have had to go up and up and clients are increasingly bewildered and intimidated by it all. Levels of engagement, understanding, confidence and ability/willingness to pay for it all are down not up. More than ever, clients are just shrugging their shoulders and saying Well, if that’s what you think is best……. but they don’t actually have any better understanding of what they’re entering into, quite possibly less because they have neither the time or the inclination or intellectual capacity to try to get their heads round the half kilo of paper to which Neil refers. Their main interest, as more and more clients are saying to me, is in the bottom line with no nasty surprises. It really doesn’t need to be any more complicated than that ~ does it?

    In the vast majority of cases, has advice actually become more suitable than it used to be, are better consumer outcomes any more certain, are clients actually receiving better value for money, is advice nowadays more or less accessible or are we all just bogged down in ever longer box ticking processes?

    The industry has become dysfunctional and completely over-burdened with compliance, compliance, compliance, with very little to show for it in terms of measurable additional consumer benefits. IMHO, both practitioners and consumers would be vastly better served by the facilitation of a streamlined advice process based on just Proposition, Costs, Risks and Tax. Those are the only things in which most consumers are actually interested. How can the regulator not see this?

  3. I agree with you Neil.

    I dont; gamble as my grandfather use to go to his cwardrobe in a Sunday for his Sunday best only to find my great grandmother had pawned ti for betting money.

    a good friend of mine doesn’t drink because his mother was an alcoholic (makes going out for a drink good for me as I can always get a lift of him or my children neither fo whom drink much!)

    You have mentioned Christianities prohibition on Usury (later softened by the Catholic Church and C of E too) and the logic behind the banning of Pork and shellfish.

    Islam’s ban on intoxication (including alcohol) becomes an interesting one with the misuse of Kat by Ethiopian Muslims (an intoxicant) and the logic behind the alcohol ban is worth knowing about i.e. Mohamed (PBUH) didn’t at first ban alcohol, it’s misuse was advised against and only banned when people had continued not to show any restraint.

    Many of the religions are based on thousand of years of debate and gradual law building so whether you are religious or not, looking at how these restrictions have been brought about has benefits. Look at ho a lot of the FS restrictions have been brought in over such as short space of time and you will see they are poorly thought out actions with counter actions which then need to be taken and hence the increasing frequency of change of FS related things including pensions, payday loans credit cards etc.

  4. I disgaree with you Neil but agree with you too.
    Disagree – There should be a huge liberalisation of regulation for simple/modest investment business. The regulator, by their own admission says we are a better industry now than RDR with qualified advisers roaming the land (odd exception to this I know) and cost of advice seperated from the product so clients have transparency. How can they still justify the level of regulartory paperwork required to sell an ISA/UT or pension? The answer is they cant legitimise their so called justification any more. NOw will they relax the regulartory requirements? That is a different question and I think we all know the answer.
    Agree- Payday lenders and gambling- Regulate the crap out of them to bring them to heel. The only problem is that the PDL’s will simply stick another zero onto their rates to cover the costs so the public who cant afford their current rates will gert screwed even more. So just shut them down and let the minority (who are going to use this type of service no matter if it is above or below ground) do whatthey want to. Interest in this sector will deminish anyway if they are shut down and not allowed to advertise in the media. As a society we can not protect all of the people all of the time. It is a sad and unfortunate fact that there are clever people (not qualification type clever – just clever, woth common sense and have their head screwed on) and stupid (or less clever if you prefer) and those less clever ones will always do worse in life than the clever ones. It is the way of the world – leaders and followers. Lets build a society fit for purpose to improve the lives of the many and not try to curtail this by regulating to the lowest common denominator. It has never worked and will never work. All you do is stifle the majority.

  5. Absolutely spot on!

    I’ve been saying this for many years now. Society is screwed when the answer to everything is, if you don’t have it just borrow it and worry about paying for it later. When later comes, the brown stuff hits the fan when they can’t pay it and suddenly, everyone else is to blame. There was a guy on the radio last week who’d got himslef in the poo by borrowing and borrowing and borrowing from a payday company as well as maxing out a credit card. Whose fault was it? Not his apparently!

    No the problem was that they shouldn’t have lent him the money even though he admitted that he knew he couldn’t repay it when he was spending on the credit card. So he wanted to know what the government was going to do about all these companies who lend money to people who can’t afford it.

    So yes Neil you are right, encouraging gambling and extortionate rates are wrong, but there has to be self control. Unfortunately the Margaret Thatcher society of the 1980’s of have it all and have it all now is to blame. Most of the recent financial crises are prodcucts of the greed culture. Has anything really changed? When you have a government that is trying to encourage more and more people to get into debt to buy houses or expand businesses then there is no hope.

    I’m in my mid 40’s and don’t come from a family that had any money, i was born and raised in a terraced house in a Lancashire mill town. Both of my parents never had much but they were careful, they saved, they had IB insurance policies, they weren’t extravagant at Xmas and we didn’t have fancy holidays. If you wanted something then you saved for it. If you didn’t have the money then you didn’t get it. That is one of the major reasons why the older generation aren’t that badly off these days beacause they didn’t get themselves into debt and they saved. Where does anyone see that in the society we have today?

    Aspiration is great if that bettering yourself is built on hard work and a sensible approach and not on the false economy of credit. As the saying goes – “Neither a borrower nor a lender be!” A think a lot of people would do well to heed that advice.

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