We are now waking up to how we pay for the City and the BBC has just run the second of four programmes that explain in a simple way, just how money leaks out of people’s savings into the financial system. You can listen to it here.
It includes a reading of a transcript of an industrial tribunal in which a State Street transition manager claims that he wasn’t lying (when falsely disclosing the Bank’s fees) because no-one had told him to tell the truth.
The statement is typical of a “it’s not my problem” attitude in the City which refers all such issues up a chain of authorities to some distant governance committee that sets the rules.
As we know, the Diamonds and Goodwins who populate these communities can condone and even encourage such gross abnegation of responsibility because ultimately they are above the law. The worst sanction they might suffer is a trimming of the pension, the return of the knighthood.
But this article isn’t about Bob Diamond or Fred Goodwin, it’s about the hundreds of thousands of people, insignificant in their own right but collectively significant, who pass the buck.
It is no good arguing that there is no culture of disclosure, or complaining about peer group pressure, people like the fellow at the tribunal have to refer to the moral compass they were born with and educated to apply.
This lack of accountability does not just apply to those involved in what is referred to as “poor execution”.
I spent some of the early part of the summer visiting people who had responsibility for some of the largest pension funds in the country and talking with them about the possibility that their funds might be the victim of poor execution. There was general consent that in areas such as trading, custody, FX and stock-lending poor execution was rife.
But it seemed that no-one we spoke to believed it occurred with the money they looked after.
The problem with people on the buy-side is that they feel so guilty that such things might be seen to happen on their watch that they would prefer to allow the potential for abuse to continue rather than to open the books for inspection.
I can understand, I put off going to the dentist for the same reason, but human weakness is not an excuse.
But there is a third party in this equation. If those instructed to execute are “getting away with it” and those responsible for checking their work are “covering up” then what of the beneficiaries of the funds themselves?
The sad fact is that we appear to be powerless to do anything about the wholesale pillaging of our savings that we listen to from the likes of Gina and Alan Miller, David Pitt-Watson ,Chris Sears and John Kay.
Well that’s not strictly true. We have got one power, we have the power to vote with our feet and move our money to places where we feel we will get a better deal. If that information is laid in front of us in a way that we can make proper comparisons.
To do that we need proper disclosure of what is going on. I had hope that we would get better disclosure when the IMA promised action. It now appears they have been allowed to produce their own accounting standard (SORP) to measure the effectiveness of its membership. How this cannot create conflicts of interest is beyond me and I’m not surprised to read the verdict on the IMA’s proposals from the True and Fair Campaign.
There will only be fair and true practice on these matters when the public gets some proper protection. At some point in the next twelve months we will get the ABI’s code of practice but I am getting tired of waiting. If the IMA are allowed to get away with it why not the ABI? The FCA can do something and should do something. If the FCA don’t act then we will need direct intervention from Westminster (something Gregg McClymont seems prepared to do).
They’ve been getting away with it for years, they still are. New technology is laying bad practice open to scrutiny but the practitioners are just laughing. We cannot rely on self-regulation from the banks or the IMA or the ABI.
It is in everyone’s interest to clean up pensions. Whether you are a fiduciary or a practitioner, whether you regulate or run a trade body, if you want a healthy respected industry in 20 years, you need to change your attitude/practice/tolerance now.