We get the regulators we deserve. It’s no use us whingeing that we have a reactive regulator if we demand a free market without interventions. But when there is evidence of malfeasance, we demand our regulators are quick off the mark and decisive when they get involved.
This afternoon I will be chairing what Horizon’s Lifetime Savings and Investment are calling a “fireside chat” between two chums, Debbie and Ian, both of whom I know and (like) well.
Since the third bullet point is deliberately open, I hope that both Debbie and Ian will extend the conversation beyond the issues of DB to DC transfers and touch upon some of the problems with Neil Woodford and his crumbling empire.
As far as I am aware, this session will not be under the Chatham House Rule , but even if it is, I expect both participants will be guarded, the FCA have announced they are launching an inquiry about what has happened with Woodford so Debbie may be able to say nothing at all. Ian may be similarly constrained but…
On the wider issue of proactivity, we are inevitably drawn, when talking of DB to DC transfers to the events at Port Talbot in 2017, the aftermath of which is rumbling on today. I have an ever-diluted story to tell of those days. Diluted because what is happening today is playing out between the regulators, the steel men, the lawyers and Al Rush.
What is important is a statement made on Moneybox last Saturday by a steel man who pointed out he will have to live with the consequence of his decision for ever. The consequences of getting it wrong do not dilute for the customer, they distill.
Knee-jerk or knee-deep?
The FCA found itself knee-deep in the brown-stuff over Port Talbot. I was in the Committee Room when Frank Field lambasted the under-prepared FCA and Megan Butler has since shown a resilience to see through justice for those who have been wronged which I find admirable.
But the question remains, could the FCA have acted faster and – if they had – would many steel men now be looking forward to a lifetime income rather than a lifetime worrying about their wealth management?
To a very great degree this comes down to whistleblowing from the general public and from advisers who are conscious of what is going on.
This is the poll that was published on the Time to Choose Facebook pages run by the steel men through 2017. The poll was taken days before Al Rush and I went down to Port Talbot the first time. We shared this poll with the Trustees , with the Regulators and – via this blog – with the general public. I have blocked out the name of the person who posted the poll though he is now a friend.
Just then, nobody took it very seriously.
Pension Freedoms have little to do with it.
In 2017, many were blaming the decisions that steel-workers were making on the siren call of pension freedom. I didn’t, that’s because none of the steel men I spoke to had the slightest clue what would happen to their money other than “an IFA would manage it”.
Steel men simply wanted the likes of Darren Reynolds to pay them their pension rather than Tata Steel (who they saw as having taken over the stewardship of their pensions from the Trustees).
There was no question in their minds that they weren’t going to get a better pension having it away from Tata.
This then is the question for Ian Price and SJP. Because SJP did take money out of Port Talbot and only stopped doing so when the full extent of the contagion had emerged.
I’ve no doubt that SJP behaved responsibly at the micro level, but at the macro level, do the big financial organisations like SJP, Aviva and L&G – all of whom had peripheral involvement at Port Talbot – need to step up and say stop? Or is there job to let the FCA do that for them?
The same question arises for the investment platforms that are involved, in whatever way, with Neil Woodford’s fund management.
I fear that many people – including providers and regulators, have hidden behind the excuse that pension freedoms changed everything. It was not the pension freedoms that caused the problems at Port Talbot, no-one talked about them; it was the breakdown in trust exploited by IFAs who have subsequently proved untrustworthy themselves.
A fireside “chat”.
Sometimes, writing a blog, helps me prepare for an event to come and this is one such occasion. I hope that some of the people attending the debate today (and even Debbie and Ian) may have the chance to read my thoughts.
I enter the chat with no clear answer to the question “How proactive do we want our regulator to be?”. I hope that after forty minutes which I hope to be a rigorous debate, I will have a clearer position.
If I am able to report on what was said and by whom, I will. If not, I suggest that you get yourselves tickets for future Horizon events as they look very good to me!
FDR – top fireside chatter
The actions of the regulator can only be assessed against it’s mandate. this becaomes more difficult when the FCA says it is principles based, as the latter is subjective and not defined.
Has the FCA cocked up with British Steel? Should risk be allowed with DB transfers? Should risk include competency of advice?
Woodford is pretty much the same – I have yet to see an aggrieved investor in the media other than those who bought on their own advice and wisdom, via a platform. Illiquidity is a risk that advisers point out to investors who seek and pay for advice. Should the concept of liquidity risk be banned by the FCA? How many other risks should be banned from investments?
I think good and competent advice should be available to all. the SEC outline and define investment risk and publish on their websites for all to see. I also believe that investment and finance advice should not be compulsory, which means people must be allowed to make thise own mistakes. Because we are talking about that freedom applying to pensions aas well, then that necessarily means wrong decisions will create financial hardship for folk.
Are we to remove the possibility of wrong decisions by people?
And in regard to advisers, as long as O level grade exams are used to determine competency then the FCA gets what it has asked for.
Henry – you know me – I take a simple view. I firmly believe that people should have the freedom to make choices (and that includes sometimes making what we may consider bad ones) and we cant always protect people from themselves. That said, collectively we can do more to minimise the risk of them doing so as long as the industry and regulators properly understand the real pressures people can face and be wary of making sweeping generalisations and assumptions.
Should various organisations sound alarm bells if they have suspicions – YES! Think about it – any organisations who espouse ESG credentials should remember there are three initials and do some hard thinking about what “Social and Governance” means. ESG shouldn’t be a bandwagon or just a product/income opportunity but a fundamental, serious ethos by which we operate (and its not really new – its remembering our basic humanity).
There was a clear social responsibility to make sure those employees – and others like them – had good advice; there is a clear social responsibility to ensure that we improve the quality and standards within the IFA arena and to make advice accessible in an affordable way (and not be lazy in simply saying its the employers’/trustees’ duty).
And to those who would say “Yes, but firms, managers, IFAs etc are commercial organisations that have to be profitable…” – it’s fine, OK for profit to be your motivator, nothing necessarily wrong in that but in doing so think hard about how you flaunt ESG credentials as if you are some knight in shining armour coming to save the environment (which does need saving but, as ever life ,is never quite that simple).
Sorry, rant over….
I love a Richards rant!