Jeff PrestridgeJul 11 2018

It's an Equitable demise

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It's an Equitable demise
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By the end of next year, the financial services industry will wave goodbye to Equitable Life.

After what will be 257 long years, the mutual insurer will be no more, absorbed into a company called Reliance Life. Finito. 

Goodbye Equitable Life, although some will probably prefer to say: ‘Good riddance’.

The mutual has probably lasted longer than many commentators expected it to back in late 2000, when it suddenly had to close to new business after a search for a buyer failed in the wake of a £4.4bn hole appearing in its financial accounts. Some thought it was only a matter of time before it went belly up, but it somehow survived.

In recent years, through the energy and no-nonsense approach of chief executive Chris Wiscarson, the society stabilised, in the process handing out generous capital distributions to with profits policyholders in order to get them off the mutual’s books.

Despite the billions of pounds spent on regulation since Equitable’s near implosion, it is scandalous that financial products are still being marketed that offer more than they can ever realistically deliver the customer.

It is to Mr Wiscarson’s great credit that a deal has now been secured with Reliance Life, part of Life Company Consolidation Group, which will result in even bigger capital distributions being handed out and a happier end to the Equitable Life story than anyone could have envisaged.

Of all the stories I have covered over the past three decades or so, Equitable Life has probably been one of the most important and emotive.

I joined Fleet Street just as questions started to be raised about the Equitable Life business model.

I then covered it extensively in the wake of its near collapse, as Vanni Treves was brought in to chair the society and policyholders’ investments were savaged to keep the Equitable boat afloat.

I was even entertained for a long while by the goings-on of Charles Thomson, Equitable’s highly paid chief executive who received an array of mouth-watering bonuses, some of which just required him to turn up to work to be eligible for them.

When not working with Mr Treves in helping to stabilise the business, Mr Thomson was busy falling in love with a secretary at Equitable half his age. Stuff fit for a Mills & Boon romantic novel if it had not been for the fact that Mr Thomson was married.

I was also a close observer of the great efforts made by policyholder pressure groups – most notably Equitable Members Action Group – and a close-knit group of MPs to get financial justice for policyholders on the grounds of regulatory failure.

They never relented and in the end they succeeded in getting compensation, although it was never enough. They got £1.5bn from the government when they demanded £4bn.

It is to EMAG’s credit that its pursuit of the remaining £2.5bn goes on despite the announcement of Equitable’s near end. Importantly, this is compensation they seek for those who have long since moved their money away from Equitable.

What hurts is that many of the Equitable policyholders I got to know over the years will never get justice because they are no longer with us. Some would ring me every week pleading for help. I gave them acres of coverage, but not the proper compensation they deserved. When the calls suddenly stopped, it was not because they had lost the fight for justice. It was invariably because they had passed away. RIP.

Some will accuse me of using a well-worn financial cliché, but Equitable really was a classic case of selling something that was too good to be true – products that were commission-free and therefore, so they said, better value than everyone else’s. ‘It’s an Equitable Life Henry’ went the adverts and it was a compelling sales pitch.

Judges, lawyers, doctors and even journalists jumped in with both feet. Independent product surveys invariably had Equitable top of the class in terms of value for money.

I vividly remember Alan Steel of financial adviser Alan Steel Asset Management spitting blood about Equitable in the early 1990s. He maintained all along that Equitable was pulling the wool over people’s eyes, making promises it could not afford. He was convinced it was a bubble ready to burst.

Most of his critical comments ended up in the pages of The Sunday Telegraph where I was personal finance editor at the time. At one stage Equitable threatened to destroy his business if he did not shut up (interestingly they laid off the newspaper for the most part, presumably because they thought they could bully Mr Steel into silence but would have less joy against the legal might that the paper possessed).

Of course, Mr Steel was right all along. Equitable was selling a lie.

While Mr Steel’s business is still thriving, Equitable’s will soon be no more. How ironic.

Despite the billions of pounds spent on regulation since Equitable’s near implosion, it is scandalous that financial products are still being marketed that offer more than they can ever realistically deliver the customer. Usually, they lack any form of transparency, as indeed was the case with Equitable’s policies.

These products are no more than a financial lie and they should never be allowed to get off the ground.

What a shame we do not seem to have learnt from the financial sins of the past and made the financial services industry a safer one for investors to navigate.

Jeff Prestridge is personal finance editor of the Mail on Sunday