If you wanted one phrase to sum up our marvellous profession, it would have to be: “What goes around comes around.” I am sure there are many others, some not hugely flattering, but if you think about this particular phrase, it can be twisted and turned to meet just about any description of what we all do on a daily basis.
Our job, of course, is to help people understand this and guide them through the ups and downs of their financial lives. In fact, this is probably the number one role we all play in helping our clients make the most of their money. But how is it that so many of our ranks, and those on the fringes, can get it so horribly wrong?
Take endowments, for example. This disastrous review of long-term contracts has shown us how to decimate a perfectly sensible contract genre. Now that might come as a surprise statement to many but I stand by the comment.
We have very few endowment clients but those we do have are looking at perfectly respectable returns again following a couple of years of stockmarket growth. Green letters turned to amber, amber to red, back to amber and are now going green again. The colour of the letters are mirroring investment returns. Perfectly predictable and understandable and what one might expect.
But add into the equation a regulatory regime that does not understand the principle of what goes up must come down (or, if you prefer, around) and you have the beginnings of a review that spawned the cancer we all face in the form of chasers.
The growth of these malignant sores on the face of our once respectable landscape was as inevitable as death and taxes.
Ask any man in the street to “remember” the details of a sale and, of course, he will recall exactly those issues that just so happen to lead to a payment of compensation. Our regulators let it happen – they let the framework evolve that led to us having to defend business written many years ago and we all know the result.
Now we have plans that are starting to perform again as they were sure to do, and you have a roundabout that looks like a scene from a horror movie.
Have a look at any contract sale and you can pick holes in the sales process. Get a chaser involved and, bingo, you have a “valid claim”. They know it, we now it and by now I suspect our regulators know it, hence the heroic fending off of the Serps review.
But littered along the way we have lessons that should have been learned.
The pension review started it all and that is where it should have stopped. But then we had stockmarket falls and a whole new line of work sprung up for those looking to cash in on the new gravy train of claim-chasing. So following the pension review, we had the Equitable Life debacle. Then the FSAVC review. Then we had the Standard Life scandal and their with-profits spat with the FSA. Finally, we have the Government trying to wash their hands of responsibility for duff “member protection”.
They hide behind opaque legal posturing when we all know employees would have still joined their employer’s scheme even if the booklet said it was not guaranteed.
That is, of course, not the point. The point is, why on earth was it possible for employers to get so deep in the mire that when they went under, they could take the pension with them? I always thought that was what Maxwell was all for but apparently not.
It seems to me that so many things are entirely predictable, even without the benefit of hindsight. So if we rely on a low common default, one of the only thing that is certain is uncertainty, why can’t we let things find their own level without the involvement of those who clearly don’t understand?
How we achieve that I do not know but I fear it involves the one thing we are all very used to and that is change.
Tom Kean is compliance officer director at The Analysts.