Knowing what you do not know

It was interesting to hear Gordon Brown's response to punish those banks who take high risks. Good luck.

Surely the whole problem, however, is about regulating events after the event. For as long as I can remember doors are being shut long after the heating has been turned off.

We have been screaming about banks' antics for years but it is only when the backside falls out of the market that someone realises the windows and doors were open and the heating is on full. It is not tricky to work out.

I had a number of queries come out after the column on the regulation of commercial brokers. Some were supportive, others were not.

My own personal view is that a commercial broker cannot give the advice an IFA should, and as such that is not treating customers fairly unless the customer is fully aware of the potential for what they may miss out on. The likelihood of that depends on the integrity of the individual.

They cannot look at Sipps, residential finance, an inheritance tax position or even the savings and investments a customer has. A customer, however, believes he is dealing with a financial adviser who is regulated and able to deal with all matters.

Consider the customer who is being advised to sell parts of his business that will now be a part of his estate for IHT.

What about the person who has a residential mortgage and a director's loan account. He could take the account and pay off the residential mortgage. He could then create the loan against the residential property and inject back into the business and achieve tax relief on the loan. He could also raise the deposit or even a large part of the loan against the residential property at a much more favourable rate.

The potential for return on the savings and investments a customer has, need to be discussed as it may or may not be more favourable to encash these.

Currently the commercial broker cannot provide this service as it is all in a regulated environment for which they are not skilled. The customer does not know that, but the broker should be investigating all these options.

So what protection does a customer have from the unscrupulous?

The NACFB has an excellent code of conduct. The correct procedures are all in place and a broker who follows them will ensure they are putting the customer first. How many follow them, is something we cannot judge, as the 'regulation' of firms through NACFB is light touch and files/advice are not scrutinised as closely as a regulated environment.

It is, therefore, down to us all to keep an eye on that. We can consider that we are all very brilliant or we can manage risks. Which is the better thought?