Open letter of congratulation to John Tiner
Dear Mr Tiner,
Congratulations on your successful appointment as chief executive of our Financial Services Authority.
If the headline that proclaimed your accession to this highly important position correctly reported your avowed intention to “shake up” the FSA, I am sure you will have maximum support from all of us who are governed by its rules.
My only plea is that, in taking a “fresh” look at this highly intricate sector, you abandon the presupposition that it is peopled by intrinsically illiterate, dishonest and unscrupulous practitioners.
Sadly, that has been a consistently jaundiced view taken by most of your predecessors, with the possible exceptions of Sir Gordon Downey and Sir David Walker, both of whom appeared to have a quiet dignity that tempered their public utterances.
You may or may not be aware of the excruciating pressure that we, seasoned practitioners (33 years' service), suffer at every erratic regulatory change of direction wrought by the misguided external influences that impinge on our rules and regulations.
It never was, has been or ever will be my objective to be anything other than successful in rendering of my best and serving my clientele well. If I failed in this, I would not survive in business, nor would I have deserved to.
The bare truth is that we are all victim to nothing more sinister than the vagaries of the market, which itself is sometimes victim to atmospheric interference from a political direction.
I cannot believe that clandestine huddles of sophisticated technicians and strategists in the inner sanctums of all our product providers deliberately concoct ever-complex devices to bamboozle intermediaries and consumers alike, with the sole intention of parting them and us from our money. We lose too, you know, if not through loss of clients and client confidence, then through unfair tithes, compensation claims and runaway PI costs.
Intervention in product design would be and has already proven itself to be a foolish, wasteful and uneconomic initiative(viz stakeholder).
What commercial sense does it make to market products with a 10-year time lag before profits can be seen? Surely by then there will be new accusations of misselling as the lack of incentive will have had a knock-on effect and produced poorer returns than other less tightly controlled products. What then? Another round of compensation claims?
By all means have some method of vetting commercially designed products to ensure that there are not any blatant tripwires that could scupper the normal aspirations of ordinary investors. Check sales and product material to ensure that no extravagant claims are being made and that investors have a clear view of what is actually being offered.
It is true that the industry has misused language and in particular the words “guarantee” and “fixed”. What should be mandatory in product brochures and key features is clarity.
Where we ever got the idea that masses of disclosure of commission equated to consumer protection and enlightenment, I will never know. But I would guess it was motivated by a green-eyed view that originated from the secure vantage point of our civil service.
So, what ails us now? Pension misselling? The instigation to transfer to personal pensions came from the then Government – remember Norman Fowler's advertisement about breaking loose from the pension chains?
Some might say that was an unwise course, thereby justifying the deluge of claims instigated by the regulator but, with hindsight, and in the light of the now rocky benefits-related schemes that are being shut down in droves, that does not wash.
The same could be true of endowments, Serps and other financial products that missed their targets because of market forces or, worse yet, as a result of assaults on their tax relief.
The point is that we should have a more mature approach to regulation than indulging in IFA-bashing as a first recourse with wholesale promotion of the compensation culture bringing up the rear.
The OFT recommendations to scrap the Lautro maximum commission agreement were retrograde. Its commitment to depolarisation and the scatter-brained suggestions that consumers will be better served by indecipherable decision trees simplistic questionnaires (if ever they could invent such a thing) and a Sandler suite of 1 per cent products is stuff that even Harry Potter's author might find difficult to present. It needs drastic measures to get us al back on track. Please, Mr Tiner, do something.
Consultations are great and most proponents of Government referenda would agree. But the sheer volume of paper that has emanated from Canary Wharf could possibly sink the QE2. How could anyone realistically expect practitioners to read, assimilate and respond in time to the vast layers of rules upon rules with all their implications that are generated by the teams of dedicated scribes at Canary Wharf? It is just not possible.
So what actually happens is this. A whole industry of like-minded scribblers evolves and becomes embedded into the distributive channels to counterbalance those at Canary Wharf. Gobbledegook is belched out at an increasingly alarming rate but our trade bodies and consumer groups assure us that all of this is on track to creating a better world and we buy it.
After all, our compliance gurus understand the lingo and will communicate with their brethren at the FSA and reams of caveats, graphs and pretentious reports will ensure that compliance” is achieved. That translates to “our client” having little or no comeback if things go wrong because he has been inundated with so much paper and been required to sign acceptances of every dot and comma that our now computerised programs can churn out at a stroke. Consumer protection?
If a shake-up is to occur, it needs to be one of attitude. It needs to be a re-evaluation of direction. It needs to be done from within, no more professors from outside coming in to tell us how to run a business about which they know nothing. Consult, big time, but slowly.
Resist pressure from the Treasury to become involved in product design and investment management. It cannot work.
So congratulations once more. Get out a blank sheet and start again.
Capital Financial Services IFA,
Bexhill-on-Sea, East Sussex