In March Prudential won a three-way battle for Scottish Amicable with a £2.8bn deal – almost three times the value of ScotAm’s original demutualisation package. Attention also turned to commission with Pru and Scottish Mutual raising payments on personal pension sales to unprecedented levels.
News of a commission war on with-profits bonds hit the front page in April as the 7 per cent mark looked set to be breached.
In September commission hit the headlines once again, this time on income drawdown with upfront levels nearing 8 per cent. Informed Choice managing director Nick Bamford recalls: “We were capping levels of commission then as we do now, although now there is much less need.”
Meanwhile, Labour MP Dianne Abbott rebuked PIA chief executive Colette Bowe for misleading the Treasury Select Committee over the PIA’s handling of the pensions transfer review. The row erupted after IFAA chief executive Garry Heath pointed out a misunderstanding over which body was responsible for carrying out the review.
By September Bowe quit and the woman who helped shape training and competence and disclosure was out of the regulatory picture.
Bamford says: “I had very little to do with her, but I remember an ex-business partner having some very ‘interesting’ correspondence with her. He was asking her if all the information and input she was getting from IFAs would actually lead to any action. I’m not sure how happy he was with her response.”
In May, just one month after the General Election, the Government was proposing the radical merger of the seven existing regulators into a single organisation headed by Bank of England deputy governor Howard Davies.
By June, the new Chancellor was already talking about the future of regulation and the creation of what was known then as “super-SIB” which would later emerge as the FSA
Recalling initial reactions to the endeavour, Bamford says, at the time, he thought it would be far too big to be pulled off effectively. Now, he says the FSA is rather like the referee at a football match: “If you don’t know he’s there, he’s probably doing a good job.”
Towry Law product services director Charles Levitt-Scrivener says there was understanding among IFAs that there was a need for change but some reservations over the rolling together of prudential, wholesale and retail responsibilities. ‘There seemed to be conflict of interest. Also, the FSA is a large corporate, meaning there is a cultural fit with other large corporate, such as banks, whereas there may be a certain lack of empathy with small firms,” he said.
Throughout 1997 attempts to form one IFA body incorporating the IFA Association, the LIA and CII continued to falter.
Levitt-Scrivener said one the fundamental issue dogging this project was the distinct remits of professional standard setting bodies and campaigning-led trade bodies.
In July, we saw Chancellor Gordon Brown’s first Budget, putting the spotlight on his decision to ditch tax credits on dividends, which made the front page.
Levitt-Scrivener says: “I compiled a table for a national personal finance section showing the devastating impact of the tax grab. At the time, certain consulting actuaries pooh-poohed the work.”
In the same edition we heralded plans to introduce a new Individual Savings Accounts, daring to suggest the move could mark the end of the road for Peps and Tessas.
July saw IFAs being dragged over the coals to fall in line with attempts to protect consumers.
Mortgage adviser who failed to register for the new Council of Mortgage Lenders code of practice by next July faced being black-listed by lenders. Last ditch attempts by about 5,000 advisers to scrape through the FPC3 exam before the final deadline ended in failure for almost half the entrants.
Treasury economic secretary Helen Liddell also piled on the pressure, threatening IFAs with swingeing sanctions unless they did not speed up the pensions review, telling advisers in an exclusive interview with Money Marketing that: “If they want to convince the Government they have a role to play, they have a lot of catching up to do.”
Unsurprisingly, Garry Heath came out fighting, rubbishing claims by Liddell that IFAs were hiding behind PI insurance.
October brought more trouble, with IFAs reprimanded by the PIA for encouraging clients to hitch a ride on the demutualisation wagon and directing would-be carpet-baggers towards the likes of NPI, Scottish Mutual and Scottish Provident.
By December Lincoln found itself paying about £500,000 in compensation to clients of its tied agent, the latterly notorious City Financial Partners. The case was subject to a Metropolitan Police investigation after it was alleged clients of CFP consultant Jerry Robertson was placing clients’ cash in an account in his name.
Bamford says: “CFP was just one in a series of ‘scandals’.
You have to ask what drove it: greed, poor regulation or some other factors.”
Also in December the Royal Commission on Long-Term Care was established to look at the short and long-term options for funding care for the elderly between the individuals and the state, with agony aunt Claire Rayner featuring among the 12 committee members. Looking back at 1997, her skills might have been much-appreciated by IFAs.