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The blame game

It has often been said that our “regulator” phoenixes itself from previous liabilities. The FSA, for example, would have you believe that it only came into existence following Government legislation and the FSMA.

Some advisers think this is hypocrisy of the highest order. They believe that if the FSA can do it, why can’t they? You could put up a strong argument that if a firm had its head screwed on properly, you might be wise to shut up shop once every five years and start again.

It sometimes feels as if we are all exposed to future litigation, whereas the FSA appears to have capped its own risks quite nicely. Why do we let the regulator get away with it? Why has the PIA managed to evaporate from the face of the earth? How is it that Fimbra no longer matters?

The implications are numerous and sinister if you delve too deeply but this is the reality that mature financial advice firms face every single day. We are scared to bin any correspondence, no matter how trivial it may seem. Our own firm, for example, has kept all correspondence from our 21 years of trading.

Ros Altmann’s tireless campaign to seek justice for failed company scheme members is a great example of how to delve into the past. Here we have an intelligent, politically experienced individual behaving like a person possessed. Her exasperation at the Governments sweeping rejection of the Ombudsman’s report is palpable. Why is this polarity of opinion being swept under the carpet? Just how loud does Ros have to shout to make herself heard?

However, I have been hearing stories with a different take on her laudable crusade. Could it be that even if an employee had known about the risks at the time, they might still have joined their employers’ scheme? After all, people are hardly going to work for an employer they think is about to go bust.

But that is in fact irrelevant. Time has shown us that there should have been a more robust funding regime and tighter rules for winding-up. This is the nub of the problem – not the “misleading” brochures around at the time. Who, after all, would have read them, let alone understood them and weighed up the potential risk of an event they could not envisage happening?

It is the bigger picture that needs looking at and the Government should own up to the fact that despite everything that followed Maxwell, nothing worthwhile happened to protect the public and it is surely exactly this that people want.

You could quite easily say the same about pension review cases. It can be shown that ex-employees did know the risks involved as it was (or at least should have been) put in writing. However, anyone with enough of an incentive will selectively remember to their advantage and claim not to have understood what was going on.

What the Government is seeing are the horrible consequences of the retrospective world it invented and one we now all inhabit. No one thought that the state of final-salary schemes could get so parlous due to poor stockmarkets and annuity rates of unimaginable levels. The FSA is getting a taste of its own medicine and it does not like it.

It hides behind all sorts of political rhetoric and bluster but it comes down to the fact that it does not want to pay for mistakes. I singularly fail to see the fundamental difference between this “scandal” and certain elements of the pension review.

The Government did not mean to rip off these people, of course, in much the same way as the industry did not mean to make those who chose to transfer out of an occupational scheme worse off or those who chose to effect an endowment mortgage as it was the cheapest way at the time or contracting out of Serps. You get my drift.

Tom Kean is compliance officer diretor at The Analysts

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