OpinionOct 30 2014

Financial services is being slowly choked to death

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The financial services industry is being slowly choked to death by creeping knotweed.

We must stop its inexorable path soon, as it is already disenfranchising swathes of consumers as well as threatening the livelihood of those advisers and companies that make financial services such a vital part of the British economy.

The knotweed comes in many forms but each vine has a recognised acronym - FAS, FSCS, Mas and ELPS.

What entwines them is their shared obsession with making bureaucracy king. Which inevitably means they have no clue as to how to deal with the ‘customer’ (if you as IFAs dealt with the public similarly you would soon be out of business).

Most importantly, however, whether in the role of taxpayer or as a levy on your business these bodies are funded by you. The ignominy of it.

In recent weeks, I have become increasingly agitated as I have found myself having to tangle with this insidious knotweed.

The first entanglement has been with the Financial Assistance Scheme, now part of the Pension Protection Fund.

The FAS was set up in 2005 by the Labour government as a taxpayer-funded body. It aims to provide assistance to those workers who lost all pension benefits when their employers went bust and left in their wake a company pension scheme that was unable to meet all its future obligations.

The knotweed comes in many forms but each vine has a recognised acronym - FAS, FSCS, Mas and ELPS

A fantastic idea in principle (I campaigned for its formation so I would be a hypocrite to say otherwise). Unfortunately, in practice not so fantastic. Empathy, sympathy and understanding towards those it is designed to support are non-existent.

It operates under the banner of ensuring that the taxpayers’ money it has been given is distributed to those who qualify for assistance (fair enough). But it does not operate efficiently. It has a nasty habit of making payments and then going back to recipients (who will often be bereaved widows and widowers) later on and demanding some of the money back on the grounds it has been overpaying - overpayments based solely on their administrative incompetence.

It argues they have no choice but to claim it back as it is taxpayers’ money but the unforgivable thing is that it does it with the insensitivity of a brick hurled through a window.

One 70-year-old widow I have spoken to has been asked to refund nearly £16,000 of overpayment - either in one go or over 12 months. Not surprisingly her monthly income is not nearly sufficient to make the repayments. The experience has left her shocked and anxious and on top of that has been exacerbated by the fact that some of the correspondence she has received has contained details of another person also in receipt of assistance from the FAS. Indefensible.

Ros Altmann, the nation’s leading pensions expert, believes the FAS’s approach towards recovering overpayments is ‘unfair, draconian and wrong’. Too right it is.

If the FAS messes up, it and its directors should carry the can. The overpayments should surely be written off and heads roll.

The Financial Services Compensation Scheme is no better. In recent months, I have spoken to a number of Arch Cru investors who have correctly filed claims for compensation when their IFAs are no longer in business.

They are spitting blood at the way they are being treated by Deloitte, the company that the FSCS has outsourced the administration of its claims to.

Information is willingly given by investors to process the claim, only for the case officer in charge to change and the same information to be requested again - and sometimes again.

Phone calls are made by Deloitte to claimants to confirm bank details, fuelling hope that at last compensation is imminent. But that hope is dashed when calls are then followed by weeks of silence leading to understandable frustration and anger.

It has also become apparent that claims made against the same adviser firm but by different investors - and submitted at around the same time - are dealt with differently. One claim gets met reasonably quickly, the other disappears up into the FSCS/Deloitte ether.

From the outside at least, the FSCS’s handling of Arch Cru claims seems inconsistent, incompetent, inefficient and bureaucratic, I dread to think how much Deloitte is getting paid for carrying out this piece of FSCS work but I hope it is charging by results, not by the hour. If I were an independent financial adviser with an FSCS levy to pay, I am not sure I would be a happy bunny.

I could go on. The Money Advice Service is nothing short of a self-serving monster that should never have been allowed to get off the ground. The fact that it has now been dropped from the panel of companies offering pensions guidance post April says it all. A Mind-bogglingly Awful Service - and to think that you lot out there fund its continued existence.

As for the Equitable Life Payment Scheme run by National Savings & Investments, it has been panned many times by parliamentary committees for the dilatory way in which it has distributed payments to policyholders and the indecipherable manner in which their payments are calculated. Unforgivable when you take into account how old these people are. Demonstrations last week in London prove how hard done by these policyholders feel.

These public institutions aim to do good but end up doing the opposite. They frequently generate frustration and in some instances, tears. They must be made more accountable. This knotweed must be controlled.

Jeff Prestridge is personal finance editor of the Mail on Sunday