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Tom Kean: Ever increasing complexity is counterproductive

If tax is too complicated those affected will stop playing ball

The high-profile brush Jimmy Carr had with the public’s interpretation of moral standards reminds us that it is actually the tax system that is too complex and not his tax advice. If you have never read the “10 men walk into a bar” story I advise you to google it, as it perfectly captures the problem we face with an overly complicated tax system.

As much as people seem to love watching a public figure squirm with embarrassment, we all really know that he pays enough tax for a thousand people. Even paying via his exotic vehicle he still paid vastly more than the rest of us, whilst at the same time gainfully employing a small army of tradespeople, as wealthy people like to do.

The fact is, our tax system is unfit for purpose as it is too complex to be readily grasped by the average end user.

And the same logic can be applied to most systems; make it too complicated and the end user will cease to engage in a positive manner.

While studying for my level 4 exams recently, I became incredulous at the preamble at the start of one of the study text chapters on the rationale for regulation.

It states: “Attempts have been made in the past to allow financial institutions to self-regulate but these have not been particularly successful.”

Of course, this is referring to the days of FIMBRA when we were in theory self-checked in all that we did, although I must admit it did not feel like that at the time. And I am sure no one would really argue that FIMBRA’s reign of power never really worked.

So it seems strange to me then that there is an assumption, in an official textbook at least, that things are working with the FSA. If we follow the logic that FIMBRA was not fit for purpose, it would be even easier to conclude the FSA was, likewise, ineffective at overseeing their subjects. And is there anyone out there who truly believes that the FCA will be any different in reality?

I have argued all along that the FSA’s motives are laudable – we all want better qualified, honest and dynamic professionals heading-up the Blue-Riband distribution channel in the UK.

But the stifling of talent and energy is palpable among our ranks. You only needed to read the study forum I used to garner some kind of appreciation of the task in hand. Some characters that were honest enough to post comments were obviously in trouble trying to pass their exams, and clearly at the end of their tether. Not for one moment did I suspect they were the type that the FSA wanted to be rid of, but that will be the result, along with all those near-to-retirement-types that have had enough and walked away.

Being 46, I came to the conclusion that I was a world away from being 26 and had barely enough time or energy to pass these exams, even at this relatively low level; if I was the studious type, I would have gravitated towards law or accountancy in my earlier career decisions I suspect.

Most other professions grandfather their ranks, or make the exam process optional. What they do not do is foist initiative after complex initiative on their members sufficient to break their backs, realising that to do so is counterproductive, not least of all to those people to whom they in turn serve.

Tom Kean is director of Thameside Wealth


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. Tom
    I think the study chapter meant that self regulation didn’t work. From your quote, there seems no reason to suppose that it implies that the current regulation is working. IMHO you have made an assumption that could be challenged quite easily.
    I don’t agree totally with your stance on examinations either. I agree that they don’t make a good IFA but a good IFA should have at least level 4 and probably beyond level 6. The level 4 exams are trivial and yet we are entrusted with our clients’ hopes, aims and aspirations. Surely it is not too much to ask that advisers have at least some formal qualifications.
    Where I totally agree with you is that complexity breeds contempt, changes that are fast and furious cause concerns and what the FSA intended has had so many unforeseen detrimental effects.

  2. I too seem to be along the same lines as Ken.

    You are not automatically a good adviser because you have the exams, but then how do you really learn without them? A good accountant isn’t necessarily the one with most letters after his name, but would you go to one that wasn’t qualified?

    I must say I do find it a bit sad that a youngster like you admitting that you barely had the time or energy to pass the exams. Firstly I’ll wager you have been in the business longer than 10 years. So why didn’t it dawn on you that qualifications were going to be an inevitability? Better to jump the hoops in your own time than have a deadline imposed by the bureaucrats.

    I’m certainly not alone or by any means unique, but my level 4 was achieved at age 43. I then went and took further exams at ages 45, 52 and took the Mortgage Exam, and finally became a CFP at age 56. I’m no academic or studious type, believe me.

    As far as time is concerned I find this perhaps the most disingenuous statement of all. What time do you finish work? How much TV do you watch? How much time in the Pub? What do you do on Saturday and Sunday? I can’t believe that a few hours here and there can’t be fitted in.

    I just take the view that if I want to stay in this business I had better just jump the hurdles or leave. I prefer to jump, and I can’t believe that a well-respected IFA such as you has any difficulty at all doing likewise. This is hardly encouragement for your peers. (PS. I’ll be 68 in October).

  3. Perhaps its my age group HarryKean (47), but I entirely agree with Tom Kean. Got my level 4 passed all exams first time except taxation(only read the nanual once, failed by one mark and resat the following week & passed) I object to compulsion & what value did my clients get from me passing tgese exans? Nada, it would havebeen more useful for me to doa degree in philosophy as I could then say i had the same quals as Hector Sants!

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