What does taking responsibility really mean? Surely, consumers are entitled to rely on statements or information provided by a firm trying to sell them something and also to rely on the firm not to omit material statements or information?
That only leaves situations where the consumer, unprompted and without reference to any industry statements or information, of his/her own volition, takes a financial decision, an area where no one, including the FSA, would surely argue for industry responsibility.
So the test should surely be whether the said statements or information exist and if so whether they are misleading, dishonest, untruthful or mistaken or feature errors or omissions.
The industry surely cannot expect to avoid accountability where it has had an involvement, even though, once the case has been heard, it might be judged not guilty.
John Ellis, former PFS director of public affairs
If you document your recommendations thoroughly in language that any reasonable person should be able to understand, explain exactly how the product works, the risks involved, the costs involved, the tax implications and a few possible alternatives (with reasons as to why you consider them not to be suitable or at least not as suitable), then you should be fireproof.
We always ask our clients to sign a post-sale feedback questionnaire to confirm, amongst other things, that they have received, read and understood the report and recommendations, along with all the supporting product info. Financial products are not all complicated but the general territory is unfamiliar to most people and it absolutely essential to make sure from the outset that the client understands what he is committing his money to and that he agrees with your recommendation.
It is not just a matter of covering your back (though lord knows we all need to do that as a matter, of course), but it is also good business. I have in the past recommended to clients investments that have not worked out (fortunately not very often) but almost always their response has been that they knew before they wrote the cheque what they were putting their money into.
To expect someone who knows very little or maybe almost nothing about investments to take a share of the responsibility for what you have recommended is perhaps a bit unreasonable. Clients who seek advice on investments are basically coming to us and asking us to tell them what best to do and we cannot really pretend otherwise.
I am amazed that the Financial Services Consumer Panel seem to feel consumers are not able to accept some responsibility for their decisions. I have been a broker for over 30 years and while I welcome sensible regulation I fail to see why a balanced view cannot be brought in to this issue. Consumers should get a fair deal, but so should intermediaries. In my view, responsibilities should be joint or is the compensation culture here to stay ?
If you buy a gas boiler from British Gas, you are expected to be efficient at making a judgement whether or not that boiler suits your needs. If it breaks down after 12 months and outside any contract, then you are stuffed.
While I accept that financial contracts are different, a boiler should last 20-25 years and for me it is just as complicated. I cannot think of an industry where an individual can complain 30 years after the event and still be listened to. This is totally unfair and, as UKIP MEP Godfrey Bloom recently stated, it is laughable in Europe.