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The lesson of Equitable&#39s fall

At some stage, a line will be drawn under the retail financial

services industry&#39s most sorry episode – Equitable Life -but not yet.

A deal has been struck to take account of the Law Lords&#39 decision

that was the immediate cause of the closure to new business and a

major obstacle to a final resolution has been removed.

It is probably the best deal anyone, bar a small minority of

guaranteed annuitants nearing retirement, was going to get.

But one group of former policyholders already say they will take

legal action in the belief they were missold while others are

considering their options. Countless policyholders will now get out

as quickly as they can.

But the warning to all in financial services is to avoid the

unprecedented arrogance that pervaded the whole society for years

prior to its collapse. It was Equitable&#39s perceived invincibility

which lulled everyone, including the DTI, the Treasury, the FSA,

accountants and lawyers, into a false sense of security.

It is worth reminding the FSA that with mortgage and general

regulation doubling its retail remit and depolarisation changing

everything in the market it already regulates, it could easily get

distracted.

For all the smoke and mirrors used by insurers which the FSA thinks

it can rectify, Equitable&#39s was a failure of plain old arithmetic –

assets did not meet liabilities.

Equitable will limp on as a source of argument and an useful income

stream for lawyers and even IFAs. But to all intents and purposes the

company is finished. Arrogance ran the company for years and

arrogance killed it off as a going concern.

Companies and regulators be warned.

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