The concept of accountability, particularly when it comes to financial decisions and their consequences, seems to be becoming increasingly vague. There appears to be a trend towards decision-makers wanting a release from decisions they have voluntarily made. Why should this be the case?
The principle of ‘caveat emptor’ (buyer beware) is long established. Savings and investment products in the UK are purchased voluntarily, including ‘Automatic Enrolment’ pensions where the saver can opt out of the arrangement if they choose. Mis-selling of savings and investment products has occurred from time to time with redress processes often subsequently put in place. However, there are also many cases where buyers have not done the necessary research nor sought relevant support beforehand, resulting in these buyers later regretting the decisions they have made. These buyers have entered into binding contractual arrangements under terms they have agreed/consented to.
The consultation into early exit charges has raised the spectre of some of these contractual arrangements being over-ridden by Government. There are also campaigns in and led by the press for certain contractual agreements to be scrapped/revised after the fact. I am certainly no apologist for the conduct of some industry participants, the contractual terms they have written business under nor the charges levied. However, clients have voluntarily signed up to the contracts they are subject to. Where agents have signed up on behalf of the client, why not seek recourse from these agents?
Times change, market conduct changes and the features of available products change. Retrospectively changing contractual terms creates dangerous precedents, sets the stage for legal challenge and likely undermines future product/service provision in the affected areas. However, creating fresh barriers making it difficult for savers to access their own assets further erodes confidence in the related products/services and providers.
The trend of seeking regulatory intervention in a mutually agreed arrangement after the fact is not limited to the UK. Some large US private equity investors have sought intervention by the Securities and Exchange Commission to compel better fee disclosure by private equity managers. These investors chose to invest on the basis of the prevailing disclosures. Might they, and their members, not have been better served by refusing to invest until the managers had agreed to disclose the fees being deducted?
There are certainly some contractual terms and practices that cannot be reasonably justified. Would savers and providers not be better served by addressing these issues for future business rather than by expending time and resources on amending contractual arrangements entered into by consenting parties in the past? The focus on governance and transparency of fees/costs proposed in last year’s “Better workplace pensions: Further measures for savers” Command Paper is, to my mind, a more effective way of looking after savers’ interests. This transparency would place decision-makers in a stronger position to make better-informed decisions. However, there is no substitute for doing the necessary background work and/or getting the relevant support before making a financial decision. Why should decision-makers not be responsible for the choices they voluntarily make?