In January MM reported a group of Equitable Life policyholders were suing the company following Treasury demands for it to deal with the multi-billion pound guaranteed annuities crisis. The action group wanted its guaranteed annuities and also for the costs not to come out of terminal bonuses.
By the end of the month, Equitable wrote to customers explaining why it planned to bring a test case to legally force savers to give up an annuity guarantee in favour of receiving healthy terminal bonuses.
MM noted that if Equitable, which always prided itself on cutting out IFAs, lost it could face bills up to £1bn.
Scottish Life head of communications Alasdair Buchanan says: “If it had been any other company facing these problems, the impact might not have been so great. The fact it was Equitable, which had long been put on a kind of pedestal with a very strong reputation, meant the story had a major effect, including showing the value of the IFA distribution model.”
In February MPs attacked a major policy document from the ABI saying insurers should ignore genetic test results on life policies under £100,000. Under the two year deal, anyone applying for cover who had taken a genetic test was obliged to disclose the results in their applications, ignoring them on mortgage-linked policies with sums assured of less than £100,000.
MPs on the House of Commons select committee on science and technology feared people would avoid genetic screening if it could deny them access to the insurance they wanted, while Tory committee chairman Sir Giles Shaw pointed out many houses in the South-East were worth more than the £100,000 threshold.
At the same time, the ABI revealed IFA business was boosted by 15 per cent in the previous year, despite growing talk of an economic downturn.
Although the IFA sector was going from strength to strength, FSA chairman Howard Davies suggested polarisation may go, well ahead of the agenda-setting OFT inquiry.
Some IF As reacted angrily, others, used to talk of the end of the distribution channel, took the news somewhat indifferently. Hargreaves Lansdown pensions research manager Tom McPhail says: “While having a distinct independent sector is a positive thing, that distinction was going to become less valid under any new regulatory structure.”
In April life offices ditched personal pensions contracts with high up-front charges, following PIA guidance effectively banning advisers from selling them.
McPhail says: ‘This looked like a pre-stakeholder strike and demonstrates the one clear benefit to the pension market stakeholder has brought. Bringing down charges was the real success story of stakeholder, not getting the great unpensioned to start saving for their retirement, even if charges were later driven too low, latterly righted when the stakeholder charge cap was raised to 1.5 per cent.”
In May one of the most tireless IFA campaigners Garry Heath quit as boss of the IFA Association, having told the board he would not seek a role in the new Association of Independent Financial Advisers.
Heath, then 45, said: “I have had ten years, but I never intended to go on forever.”
Heath had commanded huge respect from thousands of IFAs, but some recognised the time was approaching for a new style of leadership of the sector.
Towry Law product services director Charles Levitt-Scrivener says: “In today’s culture it’s possible to argue that a less combative approach to the relationship with the Government is sometimes more appropriate.”
There was also speculation in May that the FSA was planning a wholesale ban on past performance in advertising, while software giant Misys was poised to buy M&E Network and Interdependence, having already acquired Countrywide, Financial Options and Kestrel, prompting MM to find monikers such as mega-network hard to resist.
In June MM ran a spoiler on the eagerly-anticipated OFT report on polarisation, revealing the inquiry might accuse commission-based IFAs of offering biased advice.
By September it was reported the Council of Mortgage Lenders was joining the growing clamour for statutory regulation, signalling a change of heart by the trade body, which had previously supported self-regulation.
Then pension minister Jeff Rooker added to adviser’s fears over the future suggesting as much as 95 per cent of the planned low-cost stakeholder pensions might be sold without advice.
Decision trees to help direct people towards or away from buying stakeholder were once described in MM as “the best advertisement for financial advice” as many “branches” of the trees directed users towards IFAs for an expert take on their pension options.
In September Treasury head of financial services Paula Diggle infamously suggested IFAs offer their services for free stating: “Mistrust is a serious problem for an industry whose stock in trade is building a trusting relationship. You cannot really expect your clients to trust you until you have put your misselling behind you. Could you, would you, help out in your local Citizens’ Advice Bureaux for a few hours a month and give free advice?”
Buchanan says: ‘This created a huge impact and showed the mistrust between Government and IFAs. This was one of the earlier signs of tension which to an extent still exist.”