The crisis at Volkswagen can be a metaphor for the gridlock in retail financial product innovation. Ever since former FSA chairman Sir Callum McCarthy’s Gleneagles speech in September 2006, there has been an atmosphere of fear among retail product providers and advisers.
It was a bitter assault on the financial adviser sector that was unwarranted and uncalled for and opened the way for a regulatory attack on an almost defenceless and in the vast majority of instances honourable and honest set of workers.
Some of you may recall his comparison of commission with the 18th century Australian convict system, the wastage of human lives as they were being transported.
At the time we drew a comparison with the sales of new cars and compared the financial adviser with the car salesman who stands on the forecourt repeating the marketing spiel force fed to him through the marketing department about getting from zero to 60 in a few seconds, and so on.
Of course, the salesman is not an engineer and s/he would simply be learning by rote what clever marketing people say in the literature. The marketing department themselves, with their blue chip MBAs, are not engineers and would just be writing in fancy words what the research engineers have said. Now we know, from the example of Volkswagen, that engineers can make mistakes or can just be as devious and dishonest as sharp-suited salesmen.
Integrity in business is important, and that flows from the boardroom to the receptionist to the latest apprentice. If consumers, any consumer, are to believe what they are told about products, from processed foods to high-performance motor vehicles, the onus is on the manufacturers to justify their claims.
If these claims are later found to be unwarranted then it is the manufacturer, not the salesman or distributor, who should be called to explain the shortcomings.
The savings gap, pensions freedoms and the shift in reliance for long-term care from the state to the individual makes it fundamentally important that those who set up shop as product manufacturers should come with clean hands.