One of the side-effects of writing this column is that I often get inveigled into having discussions with IFAs who write to me with responses to my comments.
Generally, I try to shy away from responding at length, otherwise I would never do anything else. But a few weeks ago, I saw a reply to my column of April 5 from Dick Carne, director of Southampton-based Asset Management IFA.
An Aifa council member who also sits on the FSA smaller business practitioner panel, Dick wanted to pick me up on two issues – the role of journalists such as myself and that of regulators.
He wrote on Money Marketing’s website: “I would like to challenge you to utilise your influence…to more purpose and benefit to society in general and the financial services industry in particular.
“I believe that 23-plus years of financial regulation have done little to improve the savings, protection and pension habits of the nation. In many respects, it has made these situations worse.
“When I have challenged the FSA on this subject they show a complete lack of interest because the law does not require them to be in any way cognisant of the effects of their regulation on these key areas of behaviour. Can you help me please?”
A fuller response can be found on the Money Marketing site, under Dick’s original post. But the gist of what I wrote was that what he was asking is not my job.
Moreover, while I recognised many of the positive contributions of IFAs – despite Aifa’s own failure to publicise their good work – it is not my job to be the ally of advisers against the regulator.
I saw my own role as sparking discussion within the IFA community, not because I measure “success” or failure” in terms of the number of responses received but because debate and the clarifying of people’s views is important. This applies irrespective of whether people agree with what I say.
Dick then got in touch with me privately to continue the debate: “I fail to see the point of regulation which is so tough that people end up doing less of what is good for them. If doctors were regulated in the manner that IFAs are, the health service would grind to an immediate halt, they would only be able to see a dozen patients a week.
“Yet they are dealing with life and death on a daily basis, a subject arguably much more important than people’s money. You might consider the medical profession’s track record to be better than ours but there have been a number of cases of serious negligence and, of course, one remembers Harold Shipman who murdered hundreds without detection for many decades.”
An interesting point. The problem with it, even if we accept a post-qualification equivalence between doctors and IFAs, is that medical students have among the best academic brains in the UK. You need A-grades in every A level to enter medical school.
Second, they then undergo many years of arduous and effectively unpaid training to do the job they do. Third, when they finally begin to practise in their own right, they are paid a regular wage, not a commission.
That means the public is generally prepared to trust doctors, knowing they will by and large be acting in their best interests even if they make mistakes, which they do on a regular basis, they won’t try to give you a certain treatment because they have been paid more commission for it by a drug company, for instance.
Hence the need to regulation of their day-to-day activities is less, although from my own direct experience, there is quite a lot of ex post facto reviewing of their activities when they get things wrong, from the BMA and their employers among others.
In terms of the FSA itself, Dick’s argument – that the failure of people to save more is caused by too-tough regulation – is also focusing on the wrong issue.
The FSA has long seen its role as that of giving consumers more confidence to save by knowing they will be protected in the event of them engaging in a financial transaction.
Whether the regulator has been effective in this aim is debatable – I don’t believe it has – but that is about as much as I would want the FSA to take on board.
It should not be the FSA’s role to improve the nation’s savings habits. That is the Government’s role, if only because it is the Government that determines the role of the state in terms of the taxes it levies and what benefits it pays out.
Ironically, it has been the FSA’s failure as a regulator to prevent the major scandals of the past 23 years that have created an unwillingness to save. The FSA is always having to close the stable door after the horse has bolted.
PPI, for example, is a case in point. Similarly with other scandals, not all of which were caused by IFAs but as a result of which IFAs have been indirectly tarnished.
For Dick to argue, as he does, that the FSA should “apply a litmus test to every aspect of new regulation – if it is likely to have a negative effect on savings behaviour it should not proceed”, seems to miss its target. What do you think?
Nic Cicutti can be contacted at email@example.com