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Simplest route to reform

This year is a huge year for financial services, for we can expect new leadership after the general election and we certainly need it badly. A new team is preparing to take over the Treasury and they will be working out just what direction they want our vital service industry to take.

I have no idea how much big-picture stuff the Tories have done in terms of deciding their best approach to retail financial services regulation but I suspect little, for the understandable reason that if they get the macroeconomic regulation picture wrong, the rest won’t matter much.

However, Mark Hoban MP has been in charge of the shadow financial services brief for a long time now and is at heart a de-regulator and a supporter of enterprise and small business over rulebooks and bureaucracy. So we can hope for a positive approach although one cannot overest-imate the swamp-like nature of change management on a Governmental scale.

Mark spoke recently at a Conservative Intelligence Cicero Consulting briefing and explained clearly that he would not be prescribing anything to
the FSA about their retail or RDR brief at all. This, I was later informed, is clear code for “I have much work to do in this area but if I say anything at all I open myself to infinite questions I can’t answer yet.”

If my interpreter was right, that seems a wise enough approach and one imagines the lobbyists are thus hard at work. We IFAs are fortunate in having one of the best in the Association of Indep-endent Financial Advisers’ Chris Cummings but on the off chance that busy politicians will be reading this, let me urge Mark to make a simple but far-reaching reform to the way financial services are regulated.

That change, and I know, dear reader, you will agree, is that the FSA should, to complement their Money Guidance effort, be required by their political masters to ask before starting any new regulatory initiative, whether it will increase the amount Britons save or invest or protect. And if the answer comes back “No, not in the short term…”, then, no matter what they say after that, they should be asked to think again before even raising their concerns in public.

Under the current Treasury, the FSA has been encouraged to follow a path of perfect consumer risk reduction. They have dramatically reduced the risk of pension trustee malfeasance by unintentionally ending the final-salary regime through increased regulatory burden they have ended all invest-ment-linked savings misselling by ending invest-ment-linked savings selling altogether and they have overseen a huge rise in non-advised financial product sales by effectively ignoring their regulation while regulating advice ever more actively.

In short, across all areas of prudent financial practice, the FSA has diminished the availability and viability of advice. It is a pity they only got to do that to unsecured debt and mortgage selling just as the credit crunch closed the stable door for them.

The Tories have a chance to reset the agenda, so that it again encourages advice and sales of savings and invest-ment and protection products while controlling more closely sales of debt and properly regulating non-advised sales. If Labour preached prudence while practicing profligacy, the Tories must surely prom-ote, through tax and tone and deregulation, the taking of personal responsibility for protecting and growing one’s wealth. You know it makes sense, Mark.

Tom Baigrie is managing director of LifeSearch

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