If I had the opportunity to give one piece of advice to the FCA it would be to avoid tinkering with market forces they do not understand. In fact, stop tinkering with market forces altogether.
Putting corruption aside for a moment, it is safe to say the developed world depends on these “dark” forces working naturally and without intervention from sometimes well-meaning souls in positions of power.
It is an irony that most of those well-meaning folk really do only have other people’s best interests at heart.
But given their own self-interests and the desire to do their best at the appointed task, they will dream up ways to justify their existence and try their very hardest to make a difference. Little consideration is given to the actual sanity of what they are doing or the impact on people’s lives. They will always have the moral high ground as the “purveyors of a better way”.
If we take auto-enrolment as an example of large-scale market manipulation, we have a perfect illustration of what I mean. Somewhere, someone deemed that the market in distributing pensions outside of compulsory state provision was not working.
Instead of taking on the job themselves by augmenting what was already in place, they decided to use the private sector to deliver the project. It is classic nudge theory at play (I would call it compulsion myself but that is another story).
The ever malleable and submissive (some would say spineless) pensions industry looked for an opportunity where none really existed and took the bribe, flush with the prospect of lots of new customers. Into the mix, however, was thrown the distorted and steroidal body of Nest, with its taxpayer-funded resources and unfair market position. Now it is a huge damp squib.
Ask any number of staff at the traditional pension players and you will find a picture of mayhem. What we see are whole departments over-burdened and stressed with the massive influx of numbers. Add to this the new pension rules and you have a recipe for wide scale stress-related absences.
I will not mention any names but there is a certain office north of the border that has plumbed the depths of service depravity. Not only is its own staff at the ragged edge but our own are negatively affected too, with an almost unusable service offering. How can we maintain service to our clients if all our communications get sucked into an enormous black hole?
And how, I wonder, do all the deposit takers out there feel about the Pensioner Bonds a while back? I am all for a little competition but when it is state sponsored I get a slightly uncomfortable feeling the playing field is not as level as it should be.
I am now starting to marvel at the likely effect Pension Wise is going to have on us all. We are beginning to see how market forces are responding to this latest bit of Government nudge theory, with certain players announcing their “flat fee” half way house propositions to clients who are poorly served by the guidance service, while at the same time unable to afford the all-too-often eye watering fees from IFAs. Time will tell and I watch this space with keen interest.
Tom Kean is director of Thameside Financial Planning