Sale of services: clarity on legal insurers & unions

I want two pieces of clarity.

  1. The same consumer protection service should cover legal insurers & the legal insurance work of trades unions.  At the moment if you ring Consumer Direct about a rip-off by a trades union, they tell you to try the Financial Services Authority. Try them and they say try the Certification Office. I pressed my point on the phone so the boss of the helpline office rang me back to say that this was not a political thing; unions do other things apart from legal insurance, and that's the reasoning "like getting you cheap food at the canteen" he said. But a legal insurere that also offers human resources advice or is bundled with the services of Cardsave or the Federation of Small Businesses is covered. Likewise unions have no trouble registering with the FSA for their work flogging financial services to the mailing list, but don't want to register as legal insurers. On to the Cerfication Office: "complaints regarding a union’s failure to represent a member adequately, or at all" are not covered. That's what they say on their web site.
     
  2. Legal insurers who use no-win no-fee lawyers should be transparent about it. At the moment some legal insurers pay no insurance premium tax: all the money goes to the broker. They charge no-win no-fee lawyers such as Shoesmiths referral fees, accoding to the company quoted in an Observer article: "It's the only source of income we get", said someone at DAS legal insurance.

    Now, if the whole edifice of a legal insurance company is funded by no-win no-fee lawyers, most consumers would cancel their subscription and think of another way to get such lawyers. They would be right to do so. Apart from a murkey hope that a legal firm can use cross-subsidise cases there is no excuse for running such a service and a murkey hope is no hope at all.

Why is this idea important?

I want two pieces of clarity.

  1. The same consumer protection service should cover legal insurers & the legal insurance work of trades unions.  At the moment if you ring Consumer Direct about a rip-off by a trades union, they tell you to try the Financial Services Authority. Try them and they say try the Certification Office. I pressed my point on the phone so the boss of the helpline office rang me back to say that this was not a political thing; unions do other things apart from legal insurance, and that's the reasoning "like getting you cheap food at the canteen" he said. But a legal insurere that also offers human resources advice or is bundled with the services of Cardsave or the Federation of Small Businesses is covered. Likewise unions have no trouble registering with the FSA for their work flogging financial services to the mailing list, but don't want to register as legal insurers. On to the Cerfication Office: "complaints regarding a union’s failure to represent a member adequately, or at all" are not covered. That's what they say on their web site.
     
  2. Legal insurers who use no-win no-fee lawyers should be transparent about it. At the moment some legal insurers pay no insurance premium tax: all the money goes to the broker. They charge no-win no-fee lawyers such as Shoesmiths referral fees, accoding to the company quoted in an Observer article: "It's the only source of income we get", said someone at DAS legal insurance.

    Now, if the whole edifice of a legal insurance company is funded by no-win no-fee lawyers, most consumers would cancel their subscription and think of another way to get such lawyers. They would be right to do so. Apart from a murkey hope that a legal firm can use cross-subsidise cases there is no excuse for running such a service and a murkey hope is no hope at all.

Ban the selling of “non advised” financial products

Why? Well financial products tend to be important, such as life insurane, mortgages etc. So why are the banks allowed to sell "Non advised" unsuitable products and just wash their hands when the poor customer hits a problem. With something as important as life insurance the wrong product could ruin a family and cause untold misery. But if it was "non advised" and bought at the bank or super market or on line then it's just tough. Where as the brokers who can provide advise to look after their clients are being hounded out of business by the FSA.

If the FSA actually understood the market and clients then they would never have allowed "non advised" to come to pass, yet ever year millions of people take out the wrong cover/mortgage and are at great risk.

Why is this idea important?

Why? Well financial products tend to be important, such as life insurane, mortgages etc. So why are the banks allowed to sell "Non advised" unsuitable products and just wash their hands when the poor customer hits a problem. With something as important as life insurance the wrong product could ruin a family and cause untold misery. But if it was "non advised" and bought at the bank or super market or on line then it's just tough. Where as the brokers who can provide advise to look after their clients are being hounded out of business by the FSA.

If the FSA actually understood the market and clients then they would never have allowed "non advised" to come to pass, yet ever year millions of people take out the wrong cover/mortgage and are at great risk.

Access to Financial Advice – FSA Retail Distribution Review

Withdraw or suspend the FSAs Retail Distribution Review

At a time when the government wants everybody to have less reliance on the state new regulations are proceeding from the previous regime which will deny thousands of lower and averagely paid people access to sound independent financial advice. The regulations are being proposed as a way to increase professionalism among the practioners. However this is just a sop to the extreme consumerist lobby because of a few bad apples historically. The biggest cowboys have been booted out of the industry already. No existing practioner has any argument with wanting to be regarded as a true professional, and those currently practicing, can usually point to many years of adapting to higher standards imposed by the regulator of the day.

The new rules affect mainly independent financial advisers (IFAs) and also direct/tied sales outlets (eg Banks)

The unintended consequences of the rules are many but the most important are as follows:

It is estimated in various media that up to a quarter or even a third of existing advisers, will leave the industry when the rules take effect at the end of 2012. These are mainly advisers in their 50s and 60s who may have an unimpeachable record of giving advice, but are being told that in order to continue to practice they will have to take yet another set of exams of semi-degree standard to 'prove' their professionalism. What incentive is there for them to undertake yet another round of red-tape, box-ticking compliance when they are usually the most experienced people in the industry.

What other profession treats its proven, and most experienced practioners in such a way?

Secondly is the dirty word "commission".

Commission is flawed (but could be mended?) but it has worked for a century. Historically this has always been the way that intermediaries got paid. (Albeit that some in the consumerist lobby think IFAs shoud work for free) The proposal is to ban commission and replace it with customer agreed fees. The problem here is how many people are willing or able to pay fees?

The argument is that commission causes bias and the only reason a product is sold is so the adviser can earn commission. An adviser should be able to expect a reasonable reward for their time and expertise, having trained and been examined to enable them to do the job in the first place. As long as a valid financial need is being dealt with commission serves a useful purpose by enabling customers to get advice without having to get their chequebooks out. Since 1996 commission has been openly disclosed in documentation so that customers can see exactly what the commission amounted to and what effect it had on their investment.

In 2005 the FSA commissioned Charles River Associates to report on commision and intermediary remuneration, which it did via a number of 'mystery shopping' exercises and interviews. It concluded that there was "no evidence of bias being prevalent across the market" and "no evidence of bias to oversell".   Strangely, however the FSA decided that it would ignore its own commisioned report.

Any IFA will tell you that when a customer is offered the choice between the adviser being paid by commission or a fee, overwhelmingly the customer chooses commission. Commission is only a dirty word among those who don't understand it.

IFA businesses are the biggest aid to reducing reliance on state welfare because they advise people how to provide for themselves by saving for the long term and by protecting against loss of life, loss of job, ill health. Without them, people will be reliant on the state for such benefits, because few are motivated to do these things for themselves without advice.

The FSA seem to favour banks over IFAs. However we have seen what happens with the banks when corporate greed is more important than customer care. The Financial Ombudsman's own statistics show that more than 90% of all complaints it gets are in relation to banks, only a very small proportion in relation to IFAs.

The government have said that they will provide access to free financial advice but have yet to detail how that will work. Will the 'advisers' be fully qualified? How will they get paid? Who pays? What will be the scope of their advice?

Wouldn't it be better to encourage financial advice through experienced advisers rather than re-invent the wheel or restrict it to a financial elite?

There are other ways of ensuring protection for the consumer. Removing the perfect solution from the industry is not one of them

Allow experienced advisers to continue and allow commission to continue. The simple result without doubt will be that less people will be financially dependent on the state.

Why is this idea important?

Withdraw or suspend the FSAs Retail Distribution Review

At a time when the government wants everybody to have less reliance on the state new regulations are proceeding from the previous regime which will deny thousands of lower and averagely paid people access to sound independent financial advice. The regulations are being proposed as a way to increase professionalism among the practioners. However this is just a sop to the extreme consumerist lobby because of a few bad apples historically. The biggest cowboys have been booted out of the industry already. No existing practioner has any argument with wanting to be regarded as a true professional, and those currently practicing, can usually point to many years of adapting to higher standards imposed by the regulator of the day.

The new rules affect mainly independent financial advisers (IFAs) and also direct/tied sales outlets (eg Banks)

The unintended consequences of the rules are many but the most important are as follows:

It is estimated in various media that up to a quarter or even a third of existing advisers, will leave the industry when the rules take effect at the end of 2012. These are mainly advisers in their 50s and 60s who may have an unimpeachable record of giving advice, but are being told that in order to continue to practice they will have to take yet another set of exams of semi-degree standard to 'prove' their professionalism. What incentive is there for them to undertake yet another round of red-tape, box-ticking compliance when they are usually the most experienced people in the industry.

What other profession treats its proven, and most experienced practioners in such a way?

Secondly is the dirty word "commission".

Commission is flawed (but could be mended?) but it has worked for a century. Historically this has always been the way that intermediaries got paid. (Albeit that some in the consumerist lobby think IFAs shoud work for free) The proposal is to ban commission and replace it with customer agreed fees. The problem here is how many people are willing or able to pay fees?

The argument is that commission causes bias and the only reason a product is sold is so the adviser can earn commission. An adviser should be able to expect a reasonable reward for their time and expertise, having trained and been examined to enable them to do the job in the first place. As long as a valid financial need is being dealt with commission serves a useful purpose by enabling customers to get advice without having to get their chequebooks out. Since 1996 commission has been openly disclosed in documentation so that customers can see exactly what the commission amounted to and what effect it had on their investment.

In 2005 the FSA commissioned Charles River Associates to report on commision and intermediary remuneration, which it did via a number of 'mystery shopping' exercises and interviews. It concluded that there was "no evidence of bias being prevalent across the market" and "no evidence of bias to oversell".   Strangely, however the FSA decided that it would ignore its own commisioned report.

Any IFA will tell you that when a customer is offered the choice between the adviser being paid by commission or a fee, overwhelmingly the customer chooses commission. Commission is only a dirty word among those who don't understand it.

IFA businesses are the biggest aid to reducing reliance on state welfare because they advise people how to provide for themselves by saving for the long term and by protecting against loss of life, loss of job, ill health. Without them, people will be reliant on the state for such benefits, because few are motivated to do these things for themselves without advice.

The FSA seem to favour banks over IFAs. However we have seen what happens with the banks when corporate greed is more important than customer care. The Financial Ombudsman's own statistics show that more than 90% of all complaints it gets are in relation to banks, only a very small proportion in relation to IFAs.

The government have said that they will provide access to free financial advice but have yet to detail how that will work. Will the 'advisers' be fully qualified? How will they get paid? Who pays? What will be the scope of their advice?

Wouldn't it be better to encourage financial advice through experienced advisers rather than re-invent the wheel or restrict it to a financial elite?

There are other ways of ensuring protection for the consumer. Removing the perfect solution from the industry is not one of them

Allow experienced advisers to continue and allow commission to continue. The simple result without doubt will be that less people will be financially dependent on the state.

Consumer Credit Licences

Many business are constituted as groups of limited companies – usually 100% owned by the top, parent company.

This should be streamlined so that Group licences are available.

I am sure that there are other compliance processes where this principle could be extended such as Data Protection Notification, FSA registration, etc.

Why is this idea important?

Many business are constituted as groups of limited companies – usually 100% owned by the top, parent company.

This should be streamlined so that Group licences are available.

I am sure that there are other compliance processes where this principle could be extended such as Data Protection Notification, FSA registration, etc.

European Directives which impact on SMEs

 

To create a Small Business European Task Force to ensure legislation which could impact on SMEs is effectively monitored and engaged with from the outset.

Why is this idea important?

 

To create a Small Business European Task Force to ensure legislation which could impact on SMEs is effectively monitored and engaged with from the outset.