Fire a question at a top regulator, a chief executive or a leading IFA along the lines of can we stop misselling and the answer is almost always the same – it will impossible to stop it entirely.
If he or she is a regulator, the respondent may wish that they could stop it or if they are a chief executive or an IFA, that others would stop doing it. But stopping misselling dead in its tracks never registers on the radar.
Surely it is an admirable goal? It is arguable that the Chancellor came close to setting such a goal several years ago at a Labour Conference when he vowed never to allow a repeat of pension misselling. It would have been intriguing to see some policy flesh put on the bones of such a promise.
Of course, there is misselling and misselling. Take the pension review. The misseller in chief was the Government, then the boards of the companies and the sales chiefs who sent salespeople out to the schools or the redundancy-scarred coalfields.
On endowments, part of the problem is that sales were made in the context of a near consensus that they represented a good deal all round. The economics changed, the consensus changed some time afterwards and now endowments are viewed as very nasty indeed. The regulatory solutions to both pension and end-owment problems are very messy bodge jobs and throw up all kinds of anomalies. The endowment solution is particularly at risk of scaring people into taking the wrong actions.
The two sorry tales just about bring us to the era of FSA regulation in which misselling should surely have been banished. But no – we have had split-capital investment trusts mismarketed and, according to John Tiner, colluded over in their construction, and for good measure, precipice bonds, many of which have been missold outrageously by banks and mismarketed by executiononly outfits.
Perhaps the answer is correct. Misselling is almost imp-ossible to banish without the Government putting everyone into savings accounts and watching inflation make mince-meat of everyone's savings.
I beg to differ. If we are to have misselling as a concept, then we need to know more about it, why it happened and how we can stop it, otherwise the whole retail regulatory apparatus is a grandiose waste of time and money.
It is also why the recent select committee investigations into confidence in UK longterm savings is so disappointing. Insurance chiefs were wheeled out to be berated as MPs vied to claim the headlines, Government reviewers galore were brought along to muse on the evils of commission but an opportunity was missed.
What should have been looked at were four major problem areas – pensions, endowments, split-capital investment trusts and precipice bonds – providing a nice spread of issues, scales, and running the whole gamut of socio-economic groups and investor experience.
There should have been an attempt to look at what happened and why and why regulation, or a lack of it, failed. Then the FSA regime should be stress-tested to see how it would cope and if it can't – except after the fact – how it might be amended to stop these things happening in the future.
Perhaps this requires a combined FSA/industry working party including IFAs with consumer groups involved too and maybe some real consumers too rather than point-scoring politicians.
The process might mean the Government and the regulator accepting more blame rather than ducking it. It might mean a more preemptive policy by the regulator or, heaven forbid, a misselling definition.
Hopefully, it would not place complete blame on commission-hungry advisers or a lack of consumer education. The first is often lazy scapegoating, the second a means of being seen to be doing something.
The FSA is to embark on a whole raft of retail reforms from depolarisation through disclosure to regulation of thousands of mortgage and general ins-urance intermediaries.
It urgently needs to understand what misselling is and how to stop it. This is not providing a hostage to fortune – it is the best goal that a regulator can have.
John Lappin is Editor of Money Marketing