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Why can’t we record FSA’s compliance visits?

I was alarmed to read about the FSA’s practice of covertly recording conversations between its mystery shoppers and targeted advisory firms.

Presumably this is to enable the FSA to review, at leisure, just what may or may not have been said by the adviser who has received a call from some unknown party, who then proceeds to fire at them out of the blue all sorts of perplexingly direct and probing questions that would never normally feature in a call from a lay person merely seeking to make an appointment to discuss some aspect of his/her financial planning.

Upon reflection, you can usually figure out when you have just received a mystery shopper call but by then, of course, it may be too late to take back something you have said without having had a proper opportunity to consider your answer.

I remember a few years ago getting a call from a very pushy person who was most insistent that she wanted a seven-year endowment to bridge a mortgage repayment shortfall.

It was only after the conversation had ended that I realised you cannot have a seven-year endowment, or at least not a qualifying one, and that this had been a mystery shopper call clearly designed to wrongfoot me.

Such practices on the part of the FSA are all the more unjust and hypo-critical when one realises that the FSA is plainly hostile towards firms wanting to record compliance visits and that it reacts particularly aggressively if it should discover such a recording to have been made covertly.

If the FSA considers it acceptable to record covertly its mystery shopping calls to IFAs, then why are IFAs not permitted to record, openly, compliance visits from the FSA?

As for the issue of forcing IFAs to raise their capital reserves so as to reduce the quantity of claims falling on the FSCS, the proposition that advisory firms hold more than the minimum reserves required, so as to support poorselling practices, is plainly ludicrous and insulting. What could be a more futile or needlessly risky business strategy?

That aside, I have never understood why PI insurers refuse to accept liability for advice at the time it is given, only at the time of a (possible) later complaint.

Hence, if you do not have cover still in place, say, 15 years after advice on a particular product was given then, even though you were paying for PI cover when the advice was originally given, this is casually ignored.

Yet you may be sure that no PI insurer would even countenance starting to provide cover now in respect of business transacted many years ago during a period when perhaps no cover was in place.

Can anyone explain the rationale behind the requirement to pay for PI cover now and then to have to continue paying for it for the indefinite future?

Also, a £5,000 excess to discourage small claims is all very well but why should this apply if the total claim is more than £5,000?

It seems to be a win, win, win scenario for insurers and a pay, pay, pay scenario for the insured. Rather like regulation, when you think about it.

If the FSA really wants to reduce the volume of claims falling on the FSCS, I suggest that a better and more just line of approach would be for it to put its own house in order, start treating advisers fairly and put an end to its endless succession of hindsight reviews, the most notable of which, as we know, is the mortgage endowment review.

Julian Stevens
Harvest IFM Bristol


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