The Life Insurance Market
2010 is a huge year for financial services; for we can expect new leadership to arrive after the general election, and we certainly need it badly. A new team is preparing to take over the Treasury and they will now be working out just what direction they want our vital service industry to take on their watch.
I have no idea how much big picture stuff the Tories have done in terms of deciding their best approach to retail financial services regulation, but I suspect little, for the understandable reason that if they get the macroeconomic regulation picture wrong, the rest won’t matter much. However Mark Hoban MP has been in charge of the shadow financial services brief for a long time now and is at heart a de-regulator and a supporter of enterprise and small business over rulebooks and bureaucracy. So we can hope for a positive approach, though one cannot overestimate the swamp like nature of change management on a governmental scale.
Mark spoke recently at a Conservative Intelligence Cicero Consulting briefing and explained clearly that he would not be prescribing anything to the FSA about their retail or RDR brief at all. This I was later informed is clear code for, “I have much work to do in this area, but if I say anything at all I open myself to infinite questions I can’t answer yet!” If my interpreter was right, that seems a wise enough approach, and one imagines the lobbyists are thus hard at work. We IFAs are fortunate in having one of the best such in AIFA’s Chris Cummings, but on the very long shot that busy politicians read columns in Money Marketing let me urge Mark to make a simple, but far-reaching reform to the way Financial Services is regulated.
That change, and I know dear reader you will agree, is that the FSA should, to complement their Money Guidance effort, be required by their political masters to ask, before starting any new regulatory initiative, whether it will increase the amount Britons save, or invest, or protect. And if the answer comes back ‘No, not in the short term…”, then, no matter what they say after that, they should be asked to think again, before even raising their concerns in public.
Under the current Treasury the FSA has been encouraged to follow a path of perfect consumer risk reduction. They have dramatically reduced the risk of pension trustee malfeasance by unintentionally ending the final salary regime through increased regulatory burden; they have ended all investment linked savings misselling, by ending investment linked savings selling altogether, and they have overseen a huge rise in non-advised financial product sales, by effectively ignoring their regulation while regulating advice ever more actively. In short, across all areas of prudent financial practice the FSA has diminished the availability and viability of advice. It’s a pity they only got to do that to unsecured debt and mortgage selling just as the credit crunch closed the stable door for them. How much better off would be the UK had they prioritised bad debt sales practice for reform, ahead of bad savings and investment sales practice?
The Tories have a chance to reset the agenda, so that it again encourages advice and sales of savings and investment and protection products while controlling more closely sales of debt and properly regulating non-advised sales. If Labour preached prudence while practicing profligacy, the Tories must surely promote, through tax and tone and deregulation, the taking of personal responsibility for protecting and growing one’s wealth. You know it makes sense, Mark!
This article appeared in a recent edition of Money Marketing
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