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Stupid is as stupid does

Mis-selling and Regulation

23 Jul 2013

So if the Daily Mail is to be believed, the banks are about to embark on another compensation round, this time in relation to card fraud protection insurance. Unfortunately, even with a new regulator in place, this trend of retro-identification of miss selling will continue, and for years to come.

Why is it that year after year after year we see regulation with the benefit of hindsight demonstrating that so many consumers have, or so it would seem, been ‘ripped off’ by miss-selling and maybe even miss-buying of financial services products?

Well, in my opinion, it is because the toxicity of miss selling, where it may exist within financial products and instruments, is not discovered and dealt with before release upon the ‘innocent consumer’ as there is no regulatory mechanism to do so.

If miss selling is seen in the same place as a crime in the eyes of the consumer and regulator, then we should be asking what preventative measures are and can be taken.

We do not expect to see drinks, drugs, cosmetics, food, cars and airplanes allowed to be let loose on the ‘unsuspecting’ public before they get a licence from an authorized accreditation body demonstrating they are fit for purpose. This often involves long trials and even longer signing off processes.

The resulting accreditation these products are given places much responsibility at the door of the organisation issuing the certificate confirming it is safe to ‘swallow’, ‘apply’, ‘wear’ ‘drive’ or ‘fly. And consumers expect nothing less.

AMI boss Robert Sinclair recently and very astutely observed that the “Civil Aviation Authority keeps planes, our skies and airports safe for £126m, the Food Standards Agency (yes that other FSA) only costs £110m, so what is it that makes our new FCA so expensive at £446m”?

And he has a very valid point. The aforementioned agencies test for ‘fit for purpose’ and take considerable responsibility for that. They also licence many who work with these products, drugs and services. And when accidents happen they investigate, determine the cause and ensure a repeat of it does not happen.

And in financial services? Er no!

So, perhaps with a new regulator, the focus of the industries money, all £446m this year, should be targeted on a strategy of using intelligence, experience and even common sense to ensure that the toxicity is detected and sterilised before the product is released.

That way the consumer can be comforted when seeing that a ‘fit for purpose kitemark’ stamped on the product they purchase confirms that a body, person or persons has tested it, said it is fit for purpose, specific purposes in fact and has taken responsibility for that affirmation.

So when Robert says that the CAA keeps our skies sake at a cost of £110m, can you imagine the aviation equivalent of financial services miss-selling? Only in this case death is the consumer outcome.

If a plane falls out of the sky, you do not see fines being levied on the manufacturer by the CAA, you see action to ensure that whatever was missed that caused the crash is engineered or trained out so that it does not happen again.

For many years, I and many other commentators have said that so much wasted cost and consumer detriment can be taken out by the regulator if foresight was used rather than hindsight. This principle operates in every other part of consumer life, why not in financial services too?

Only the most stupid person could possibly disagree surely? 

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Comments (1)

All so true but what you seem to overlook is:

Common Sense is now dead.

His birth records were long ago lost in bureaucratic red tape. He will be remembered as having cultivated such valuable lessons as:

- Knowing when to come in out of the rain;
- Why the early bird gets the worm;
- Life isn't always fair;
- And maybe it was my fault.


Common Sense lived by simple,
sound financial policies (don't spend more than you can earn) and reliable
strategies (adults, not children, are in charge).


His health began to deteriorate rapidly when well-intentioned but overbearing regulations
were set in place. Reports of a 6-year-old boy charged with sexual harassment
for kissing a classmate; teens suspended from school for using mouthwash after
lunch; and a teacher fired for reprimanding an unruly student, only worsened
his condition.


Common Sense lost ground when
parents attacked teachers for doing the job that they themselves had failed to
do in disciplining their unruly children. It declined even further when schools were required to get parental consent to administer sun lotion or an aspirin to a student; but could not inform parents when a student became pregnant and wanted to have an abortion.


Common Sense finally gave up
the will to live, after a woman failed to realise that a steaming cup of coffee was hot. She spilled a little in her lap, and was promptly awarded a huge settlement. And that ‘Elf and Safety’ became the watchword of the inefficient, the lazy, the cowardly and the downright stupid.

Common Sense was preceded in death,
-by his parents, Truth and Trust,
-by his wife, Discretion,
-by his daughter, Responsibility,
-and by his son, Reason.


He is survived by his 5 stepbrothers;
- I Know My Rights
- I Want It Now
- Someone Else Is To Blame
- I'm A Victim
- Pay me for Doing Nothing


The compensation culture not only lives, but thrives nurtured by an army of Quangos, bureaucrats jobsworths and ‘do gooders’

Harry Katz   24/07/2013   09:51

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