Update from Mike Fenwick

Before my more detailed comments, I wish to place on record my sincere thanks to two people - Evan Owen and Rod Leonard for the support they have given me, whilst I carried out the research against which I make the comments below.

The jury is out on whether I should thank them for encouraging me back into a world of regulatory insanity, one that I thought I had left - altho' in more recent posts here, you will have seen me say that I had started and intended to continue.

Let me first make this distinction - it is something I recorded in a very early post on here - I do not believe that all IFAs, and their actions can be defended, I do however believe in financial advice which is truly independent.

You may not have seen this article in Money Marketing:

http://www.moneymarketing.co.uk/adviser-news/ifas-must-break-the-pattern-of-top-down-financial-hierarchy/1018926.article

It was as Evan commented, edited from the draft I sent to MM, but it does contain two sentences which I wish to highlight - these:

As an IFA, think of the FSCS. Your survival requires you to account for your own liabilities but also pay for the failures (undetected by the regulators) of everyone else. Similarly, the public must cough up for its own liabilities and for the failures (again undetected) of the banks.

There can be no IFA who is unaware of the issues over the costs of the FSCS etc etc.

Equally there can be nobody in the UK who is unaware of the costs arising from the collapse of the Banks.

They are both issues where the innocent are asked to pay for the costs of the guilty.

I have another article to prepare for MM - in which I will start to offer suggestions as to how the FSCS could be totally reformed - apologies, but details have to wait until I have agreed the position with MM.

Now, I doubt whether most, if not all, IFAs would understand why I am targeting the issue of bank charges, but there is for me a very valid reason and it ties in with the distinction I drew above.

Good IFAs take on the problems of their clients, and broker their clients through the complexities of the financial world - it is that in that performance that they have value and add value.

In time I will attempt to show how by targeting one issue, in this case Bank charges, it is possible for IFAs, by resolving that issue for others, they can also address the issues they themselves face.

Are they same issues?

Well, here is an extract:

Referring to both the OFT and the FSA, and in particular to the waiver issued by the FSA, I ended my last post with this question:

What is it in the nature of their relationship, that allows them:

- complete control over the rights to justice of ordinary people,
- and the power to halt Courts of Justice stone dead in their tracks! Something not even Governments find easy to do.

Do IFAs feel that the FSA have complete control over their rights to justice?

Do IFAs feel that the FSA and the FOS can halt the Courts of Justice stone dead in their tracks?

And yet in that extract - I am not writing about IFAs directly, but about the millions of ordinary members of the public who have been denied their rights on this issue of bank charges.

Where is that extract from? A blog I am writing which can be found here:

http://notproven.blogspot.com/

The blog is very much work in progress, and I wish to see it finished asap. Then I will advocate the next steps - for those who are interested in restoring some sanity to the world of regulation, for themselves, AND the wider public.

Mike ...


PS: The FSA, OFT, Treasury Select Committee and others have been made aware of the blog, and whilst not yet complete I am now extending the list of those who I think need to be made aware of its existence. If any of you who are reading this post wish to advise others (who may not be on this IFADU list) of its content, please feel free to do so.

Special report: Inside Britain's deathbonds scandal | Reuters

Special report: Inside Britain's deathbonds scandal | Reuters

Why is the FSCS paying out (with some uncertainty) on Keydata - Lifemark "investments" when in the opinion of many in the case of adviser involvement the advice was flawed in the first place?

Is it fair and reasonable that Independent Financial Advisers (IFAs) who avoided these products for good reason should compensate the customers of those who did sell these esoteric and opaque "investments"?

FT.com / Personal Finance - Keydata investors can claim compensation

FT.com / Personal Finance - Keydata investors can claim compensation

"Eligible"

"Redress not yet quantified"

"Marketing Material" - most cases were based on advice.

Keydata compensation conumdrum

Who dunnit? Lots of people blame Stuart Ford, but is that right? Was it he who designed the products? His family trust has a large collection of these life settlements which used to be called "Viatical Settlements", he proposed a 'rescue' package which was rejected by the Financial Services Authority, it is reported that an FSA spokeperson said Ford was under investigation, does this preclude Ford from attempting to 'rescue' the investors?

Who pays? Most people expect the Financial Services Compensation Scheme (FSCS) to pay out because that is what the fund is for, but is that right? Why should IFAs who avoided these products be expected to pay for the acts or ommissions of those who did?

Who else can pay? Those who bought direct from Keydata are up a gumtree, those who were advised may have a claim against the adviser who sold them the bond/plan, the FOS award it twice that of the FSCS payout but if an IFA goes bust because of the claims then the FSCS pays out, supposedly.

The key is what decision does the FSCS arrive at? To pay or not to pay, that is the question. If it decides this week that it won't pay out then the likes of Norwich and Peterborough Building Society (N&P) will face a barrage of complaints either directly or via Gareth Fatchett and Regulatory Legal. If N&P has professional indemnity insurance then that will take the biggest burden of cost above the level of excess. If it doesn't have insurance the members will have to pay.

For small IFAs the story is quite different, they will be hoping the FSCS pays out but what about their PI insurance? What about the claims above the FSCS limit?

Is this what regulation is all about? Is this what consumers expect to happen when such a comprehensive regulatory regime is created by the people they elected to Parliament?

IFAs not on a level regulatory playing field

IFAs have been suffering under the workload of dealing with complaints relating to projected shortfalls on mortgage endowments and paying compensation for a 'loss' which has not yet materialised. Whether the compensation was paid directly or via the Financial Service Compensation Scheme is irrelevant because in the vast majority of cases the shortfalls were created by the life offices who wish to remain nameless and in the case of Standard Life has refused to make any offers of redress.

The Financial Services Authority claims that all the life offices have paid redress, this is untrue because the FSA's own definition of redress is to place the complainant in the position they would have been had they not purchased the contract and this has not happened. Instead the insurers have used various methods which include 'special bonuses', 'endowment promises' and 'enhanced allocation rates', none of these have assisted IFAs in avoiding overpayment of compensation which is calculated using the surrender value as the datum . This surrender value has been depleted because the premium paid has been much smaller than that required to achieve the target value at maturity so all charges and expenses have had an adverse effect on the smaller investment value.

The FSA also claimed that disclosing the names of the companies would breach their rights under Article 6 and 8 of the Human Rights Act 1998. The Information Tribunal has now dismissed an appeal against an Information Commissioner's decision to disclose the information requested.