FTAdviser.com

Advertising

The panel's comments also carry a strong message for the financial advice industry: make sure you understand a product before you attempt to sell it.

It points out that it is ludicrous that the FSA should expect consumers to be responsible for decisions about products “when it seems that often those selling them do not understand how they work”. It argues that the regulator should “focus its attention on the firms it authorises, not the consumers it is set up to protect”.

It is an argument that I back to the hilt. Time and time again consumers have been sold products that are completely inappropriate and which they did not have a hope of understanding. Further investigation often reveals that those marketing and selling them had an equally vague understanding of how they actually produce the returns they are promising.

All they were interested in were the marketing claims and the commission paid.

The perfect example is the Aviva Global Balanced Income fund, which was sold through Barclays branches. The bank’s marketing information provided to salesmen did not accurately represent the risk of the fund resulting in its being sold to the wrong people.

Barclays is not alone in selling investments which its salesmen did not understand. It is the same with banks, insurance companies and IFAs with products such as endowments, whole of life insurance, split capital investment trusts, precipice bonds and pensions.

At a time when the industry is under huge financial pressure to create profits from every possible avenue, the FSA must be barking mad to even consider putting more responsibility on to the consumer.

Product design is becoming ever more complex. Even the most basic savings accounts are now riddled with terms and conditions designed to trip up the unwary.

The consumer panel has hit the nail on the head here. If you are selling something, you sure as hell should make sure you understand it.

Hard on newbies

Would the Tories really dare to tackle public sector pensions if they came to power? Theresa May, the shadow work and pensions secretary, brought the prospect a step closer when speaking to the CBI Pensions Conference.

In one sentence, she spelt out the possibility that they may have the courage to tackle the trade unions and civil servants: “We also recognise the concern about the level of MPs’ pensions and have always said that moving new MPs onto a defined contribution scheme is a crucial first step in any wider reform of public sector pensions.”

Whenever I have spoken to Tory MPs about this vexed subject, they have invariably fudged it. Ms May’s comments suggest that there may have been a change of heart.

Note though, that she is only suggesting getting rid of final salary pensions for new MPs. Presumably she wants to hang on to hers.

She also emphasised that benefits already built up by public sector workers would be protected, which is only fair. But she has opened the door to the idea that public sector pensions are not sacrosanct and that reform could happen.

There are a number of sensible options which could cut costs considerably such as including blocking entrance for the first few years of employment, raising the minimum retirement age to 65 and eventually 68, cutting the rate at which the pension is accumulated, switching to average salary, and increasing contributions made by members. These are all measures which have been taken in the private sector, so if those in the public sector wish to retain their gilt-edged pensions, they should be prepared to pay for them.

More turf wars

If you do business with us, then we will help someone else to pinch your clients. This appears to be the subtext of a story which appeared in Financial Adviser last week, where Phoenix Life passed on an IFA’s list of clients to the direct mailing arm of Axa Sun Life.

I am not surprised that Nick Beatty, director of Cedar Wealth Management, was somewhat irritated to say the least.

Phoenix may claim it has a legally binding contract with Axa, but it appears to be willing to ride roughshod over its relationship with Mr Beatty’s firm.

It really is not good enough for Axa to claim that clients can opt out of the mailing list. Axa appears to have overlooked the fact that these are not its clients but those of Cedar Wealth Management.

It could at least have given him the courtesy of telling him his clients may be pestered in this way and then he would have had the choice of accepting Phoenix’s terms or taking his business elsewhere. I know which I would have done.

Email: t.hazell@gmail.com