OpinionOct 2 2013

Mutuals hit hard where it hurts by FSCS levy

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Chief executive Chris White is, not surprisingly, very unhappy. He said: “The scale of our mandatory contributions to a scheme that mops up after other bodies’ mistakes is staggering. Our relative share of this enormous bill bears no relation to the relative risk to our savers.”

Well said. In the past five years the society’s members have contributed £1.15m to the FSCS – a sum that could have boosted every saver’s interest rate by 0.25 of a percentage point for a year.

This year’s bill is more than double the £175,000 the society was forced to contribute last year.

If these payments are based on risk then an actuary somewhere is doing the wrong sums.

Hinckley & Rugby has mortgage arrears of £22,000 from a mortgage book of £442m.

What has it – or any other building society – done to deserve this? Unlike financial advisers, no building society has ever dumped its liabilities on to the FSCS and launched a phoenix firm.

When Chelsea came a cropper it was taken over by Yorkshire as was Norwich & Peterborough. Others were swallowed by Nationwide.

Throughout the recent crisis every building society that got into trouble was rescued by a larger society without recourse to the FSCS, something that cannot be said of the banking or advice sectors.

Yet in the past five years societies have paid £533m to FSCS.

When advisers look for someone to blame for their FSCS bill they target commentators, regulators, the ombudsman – in fact at anyone except fellow advisers who have let their sector and investors down.

There needs to be a safety net for savers and investors but the payments should bear at least some relation to the realistic relative risk of each sector posed by each sector.

There needs to be a safety net for savers and investors but the payments should bear at least some relation to the realistic relative risk of each sector posed by each sector.

As it is, Hinckley & Rugby expects to face a bill in 2014 of at least £350,000. That is money taken from savers who have chosen a building society because they want to minimise the risk to their savings.

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Way off the mark

Days before having the party whip removed for his ill-considered comments on untidy women, Godfrey Bloom, UKIP’s financial service’s spokesman, lashed out at the Financial Ombudsman Service.

He branded the lack of financial qualifications among staff at the Fos “immoral”.

Mr Bloom said: “Anybody who is adjudicating or auditing should not only be as qualified as the people they are inspecting, they should also have at least five years of practising experience.”

These comments seem to have gone down well with financial advisers many of whom, I suspect, have UKIP sympathies. But they do not stand up to the slightest scrutiny.

Are we to expect every judge and magistrate to have a QCF level four qualification and five years of work experience before they can tackle a case involving money?

He makes a fallacious comparison to the British Medical Association saying you would expect its head to be a doctor. In fact the BMA is the professional body and trade union of doctors.

The proper comparison would have been to the Health and Parliamentary Ombudsman, which certainly does not insist staff are medically qualified.

Or there is the General Medical Council (doctors’ equivalent of the FCA) which has 12 members, six of whom are lay members.

IFAs do not have a self-governing professional body which is why they are independently regulated.

Mr Bloom went on to describe Fos chief executive Natalie Ceeney as “articulate and intelligent” but with “no financial experience of any sort”.

Actually, she has a first-class honours in mathematics and social and political science from Newnham College, Cambridge, so not only has she got a rather strong grip on numbers but she could also give Mr Bloom some tips on his day job.

And what is more, I bet she cleans behind her fridge.

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Making the right pick

We may have got a glimpse of the future of DIY investing with the launch of FundCalibre, a fund rating agency by Chelsea Financial Services and Albemarle Street Partners.

This could add more information for investors but it does strike me that we are creating an interminable chain.

First we have fund managers who try to pick shares that will outperform.

Now we have the rating agency that will try to pick a fund manager who can pick shares that outperform.

Of course the financial adviser has to pick the ratings manager who can pick the fund manager who can pick shares that will outperform.

So now all the investor needs to do is pick the adviser who can pick the rating agency who can pick the fund manager who can pick the shares… and he will be happy ever after.

Tony Hazell writes for the Daily Mail’s Money Mail section. He can be contacted on t.hazell@gmail.com