Not a day goes past without another twist in the Equitable Life debacle. Now, in the lead-up to the general election, the Tories are threatening to make it a political issue, provoking conflicting responses among IFAs.
In a debate in the House of Commons on the Equitable Life affair, Shadow Chancellor Michael Portillo criticised the Treasury, saying: “Will the Chancellor of the Exchequer recognise that the fate of millions of people has been affected by what has been done in his name?” Shadow Economic Secretary Howard Flight and Conservative Treasury spokesman Richard Ottaway have both kept up the attack on the Government's handling of the affair.
The FSA is conducting an internal inquiry into the issue and a Treasury select committee is set to start its own investigations. LibDem MP Vincent Cable has also entered the fray, calling for answers to how the situation was allowed to develop.
The saga gains added piquancy as many of those who work in the Houses of Parliament are themselves directly affected – the Parliamentary pension scheme allowed for AVC polices with Equitable Life.
IFAs seem to agree that the situation is deserving of political intervention. Michael Philips partner Michael Both says: “I think that anything that brings the Equitable Life situation into the open is to be highly commended.”
Holden Meehan director Amanda Davidson thinks that intervention might act as a spur to get things sorted out sooner.
Wentworth Rose managing partner Philip Rose says: “There is a bona fide political point. The Government could have taken more action.”
If IFAs seem on the whole satisfied that the Equitable Life debacle is worthy of the attention of politicians,it does not mean that they are also happy for it to become the subject of polarised party political debate.
IFA opinion is sharply divided between those who either support or attack the Conservative position or want the issue to remain outside the ambit of party politics.
Both says: “The Conservatives have Labour bang to rights. Politicisation is inevitable. Labour has tried to destroy the IFA sector. It is a slippery slope – Labour started by making things political.”
Equally vehement but diametrically opposed is Annuity Direct managing director Stuart Bayliss, leader of the Equitable Life Action Group and an erstwhile Tory.
He says the Tory intervention is “pathetic”, adding: “At the time, I find it very sad that the Tories are trying on the basis of inaccuracies to make political capital out of a tragic failure of regulatory control.”
Most IFAs, however, are reluctant to be drawn into explicit party politics.
Davidson speaks for many, believing that the current situation would exist irrespective of which party is in power and that “finger-pointing is not helpful”.
In the debate on the subject in the Commons, Portillo sought to pin blame for the debacle on Chancellor Gordon Brown.
Citing leaked Treasury documentation, Portillo claims these showed the Government knew of the potential problems before handing over the reins to the FSA and that it approved Equitable Life's decision to reduce the bonuses payable to people who had guaranteed annuities.
Bayliss does not agree with the Tory interpretation, believing that it is based on a wilful exaggeration of available documentation although admitting that he does not know what the answers are.
Notwithstanding this reluctance, there is a lingering resentment in the industry directed mainly at the FSA.
The regulator was introduced by the Government and, at the same time as IFAs have seen their work expensively burdened by regulatory requirement, they also watched in disbelief as the FSA stood and watched as the Equitable Life debacle unfolded.
Rose says: “While we are jumping through hoops to meet compliance requirements, it would be nice to know that the regulator is doing the same.”
As regards Opposition pressure for a full inquiry into the affair, this has garnered little support. Most would like to see what the FSA report will say before considering further action.
Rose warns of a further possible unwelcome consequence. He says: “An inquiry might lead to the Government having to pay compensation, which I believe would be a step too far. Compensation culture is a danger – caveat emptor disappears. Anything that points out the failings of one of us in the industry can end up tarnishing us all.”
IFAs stress that investment will always carry risks, which no amount of regulation or political intervention will be able to do away with entirely. Advisers point out the fact that most Equitable Life policyholders are highly educated and aware and that they ultimately made their own choices.
If IFAs are unwilling for the most part to be drawn into the political fray, what do their clients think?
While IFAs report that the many Equitable Life policyholders they are seeing are very angry at the affair and do not understand how the situation was allowed to develop, they are not hearing it translated into party political terms.
Rose says: “People are not saying it is disgusting and that the Government should be doing something about it.”
What affected policyholders want is advice on how to remedy their own personal finances. “What I do hear from the hundreds of clients I see who have Equitable Life policies is that they now just want to spread risk so they never get into a similar situation again,” says Rose.
If the Equitable Life situation does become a political football, it will this undoubtedly have an impact on IFAs' daily business.
Bayliss says: “With any inaccuracies or exaggerations – which includes political spin – it becomes more and more difficult to deal with real client need in an appropriate manner. More difficult means more time-consuming and, therefore, more expensive.”
He is also concerned that, as a result of what he sees as irresponsible reporting and the politicisation of the debate, clients may decide not to do what is in their best interests and his business could be affected.
Bayliss says: “I have received emails from clients following inaccuracies in a national newspaper saying that as a result they would not be following the advice which I gave them.”
If there is one thing that independent advisers are agreed upon, it is the need to learn lessons from the affair and move forward.
Davidson says: “You cannot change the past but you can try to stop it from happening again.”