Baying for blood, but who is looking at the big picture?

The real headline grabber was the Office of Fair Trading (OFT) report into workplace defined contribution pensions. Cue gory headlines about rip-off pensions as the regulator frowned upon old-style contracts from the pre-stakeholder days that are still taking or at least managing investors’ money.

We at least know one thing – the RDR has not put paid to the arguments, the accusations and the overall feeling of suspicion about financial services. John Lappin

The second attack – which drew fewer headlines, but still grim ones – were concerns raised by the FCA about provider inducements seeking to encourage recommendations from advisers. One of the worst headlines in this instance was “Insurers still bribing advisers”. It certainly isn’t mincing its words.

We at least know one thing – the RDR has not put paid to the arguments, the accusations and the overall feeling of suspicion about financial services. But is it fair? Well, taking the OFT report, I would suggest no, or not necessarily. The OFT says it is worried about old contracts, their higher average charging rates and many inexplicable charges while also voicing some governance concerns about smaller trust-based schemes. Ninety per cent of schemes by and large passed muster, not that one would know that from reading the national newspapers.

Now, there is definitely an argument against at least some providers, and certainly the closed members of the life office gang. But tarring everyone with the same brush looks and sounds unfair. If anything, advisers have often tried to rewrite these contracts and free money from the clutches of the closed offices in particular.

If there are sins, they are a decade-and-a-half old, and actually they should be judged against the practice of the times. To take a calculation based on the average difference in the cost of these schemes and then extrapolate some huge deficit is also grossly unfair. The real problems are particular. So while DC pensions in the round are an issue that the OFT had to deal with, some of the remedies – including retrospectively stripping out commission – are of limited benefit. The condemnations of some collective overcharging monster trading under the name of the pensions industry are certainly very harsh.

To find some real villains, I suggest one considers big utility firms, which are clearly waiting to see who moves first, before this seasons’ orgy of price gouging begins.

But the OFT report, for all its far-reaching consequences, was not the only knock financial services took. The FCA report concerned inducements, the bulk of which appear to be going to larger IFA firms and networks in particular. These include multi-year payments to support long-term relationships, overseas trips of several days including spouses and family, payments for access to senior management, help with joint marketing and IT support. Those aren’t quite the headings the FCA used and I can see, as a journalist who writes about IFA matters, some justification of the latter two. But the first three belong to yesteryear when the world was young and commission was high.

It will surely set off a new round of inter-adviser strife. But it has very little place in a market where the IFA is morally and legally the agent of the client. And as a journalist who has always supported IFAs, this needs to be cleared up fast. In anyone’s terms it is indefensible.

John Lappin blogs on industry issues at www.themoneydebate.co.uk