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Jerry Hayes

In 2013 the Treasury will put financial advice to all but the wealthy in the hands of the banks. This is a “fucking car crash” which must be stopped.

March 5th, 2011 by Jerry Hayes

If you walk past HM Treasury and you hear strange  noises not noticed by its inhabitants; stop and listen carefully. Because, that cacophony of sound, is the collective noise of a selection of  time bombs carelessly laid by the  last government. Some, when they explode, will cause minor injuries. Others will cost political lives and could shake the foundations of this Coalition whose bedrock is fairness and justice.

In 2013 there will be a major explosion which will probably take the government by surprise and will be meat and drink for the Mail and the Telegraph. For in this year the hardworking middle classes, who want to look after themselves and their loved ones in old age and death, will be cast adrift of sensible financial advice and put into the  greedy, sticky little hands of the bankers.

Gone will be the days when your trusted family financial advisor will give you sound, impartial, advice about pensions and life insurances. Well, not quite; you, will have to pay a fee up front for it. Which means that only the wealthy will be able to afford the sort of financial advice that is so important for protecting our families. At the moment, we have something that this Coalition passionately believes in; choice. We can choose whether to pay our Independent Financial Advisor (IFA) a fee or have the money deducted from a commission that comes from any product we might have bought. That right to choose will disappear in 2013. Which means that swathes of ordinary decent folk will be denied the opportunity of sound, qualified and impartial advice. They will be driven into the clutches of the banks. It’s like putting the vampires in charge of the blood bank. But without the romance.

This all goes back to 2006, in the golden days when Gordon Brown was Chancellor and Ed Balls was Minister for the City. Remember that famous speech he gave to bankers crowing about the virtues of  light touch regulation and risk based management? It should be engraved on the tombstone of the British economy. Well, the FSA (shortly to be abolished) came up with a perfectly sound idea of improving the qualifications of IFA s to better protect the consumer. Perfectly sound principles that nobody could disagree with. But then, as usual with the last lot it, was not carefully thought through and worse, they were still in thrall of the Masters of the Universe who could do no wrong. So the Retail Distribution of Financial Advisors (RDR) was born.

Unfortunately, the midwife, the gynecologist and the father who donated his sperm, all happened to be bankers.

Now for some scary statistics. The cost to IFAs of the proposed RDR is £1.7bn and this cost will fall directly on the investor and consumer at a time when the UK has the lowest personal savings ratio in the G20, with widespread pension under funding.

Well, the banks will say that they are perfectly capable of advising their customers. Oh really. According to the Financial Services Ombudsman IFAs have 65% of market share on advice and selling with 2% of complaints. And complaints against the banks? A mere 61% and rising.

And it gets worse. The banks know that is no more economically viable to service a £50 a month client than an IFA. So they’ve come up with a wizard idea. They are to be providing us with a “simplified” advice service targeting the “mass markets” and on “models based on a “limited assessment of a customer’s financial services”. All at a time when the banks are regarded as having the morals and business principles of a Punjabi whoremaster. In a nutshell it will be crap advice on the cheap.

The UK’s leading money expert, Martin Lewis,  sums it up rather well,” There is a worrying possibility that the FSA is about to kill off independent financial advice in the UK for all but the wealthy. I’m not convinced that most people will want to pay for advice. The commission route has the advantage that you don’t pay a fee each and every time you want information; you can go without the worry of laying out cash”.

This is an idea that should be strangled at birth. Financial Secretary to the treasury, Mark Hoban, take note. Members of the Treasury Select Committee who will be questioning Hector Sants whose brainchild this is, warm your castrating irons. And Andrew Cooper Cameron’s new Director of Strategy? Time to kick some Treasury arse old son, because this is a “fucking car crash” that can be painlessly avoided.

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Comments [ 15 ]

  1. Nicholas Heneghan. Nicholas Heneghan. says:

    I know this is a bit off topic, but you state: “At the moment, we have something that this Coalition passionately believes in; choice.”

    Could that choice be extended re: the BBC? At the moment if we choose to try an avoid the licence fee we are rigorously penalised; is that right, or fair?

    Apart from that, I notice your spelling seems to be improving, new spell-checker?

    Regards, Nick H.

    • Jerry Hayes Jerry Hayes says:

      The reason the spelling is getting better is because you made me treble check it all! Thanks. BBC has always been a tricky one, but on just about everything else choice seems to be a priority.

  2. Colleen Colleen says:

    I don’t know why Broon and co didn’t just hand us all over lock, stock and barrel to the banks and be done with it…

    …oh, I forgot, they did. The b*st*rds.

  3. evad nikral evad nikral says:

    This particular rant of yours seems unusually well researched, well written and well-judged for you Jerry, who wrote the original? All very well timed on a day when Mervyn King shared with us the remarkble revelation that “…if it’s possible to make money out of gullible or unsuspecting customers, that’s perfectly acceptable” – to the Banks who will inherit the financial advisory earth if RDR is allowed to be imposed by the FSA. Wake up Treasury Select Committe, wake up George, wake up World. Why aren’t we more angry? Personally I’m fucking furious!

    • Jerry Hayes Jerry Hayes says:

      Actually it was all a bit of luck. Had dinner with a friend a week ago who told me about his submission to parliament on this, but only had time to read it yesterday. So the statistics come from those who warned the FSA that this whole scheme is outrageous bollocks which made me rather angry. It was fortuitous that King made his comments the day before. However I did write it all myself! I really do hope people wake up and see what could happen.

  4. Christopher H Christopher H says:

    I understand what you are saying,but from my experience.Anytime I have been to a financial adviser,I have found that I know more about finance then they do,especially these retail banks.It is not really a question of paying for, or getting free financial advice.It should be the quality of advice that should be questioned.And for the vast majority of Financial Advisers out there,the advice they provide is rubbish.

  5. rod jamieson rod jamieson says:

    Totally agree with you…and I for one always thought you would have made a great Prime Minister… maybe you would have actually got some stuff done, and no, I’m not joking.
    I do know you from a very long time ago, you were always true to your beliefs even then.

    • Jerry Hayes Jerry Hayes says:

      Were we at school together in westcliff? I recognise the name. Didn’t you used to live in Winchmore Hill? Maybe I’ve got it wrong. if not please remind me. Kind of you to say about being PM. Much appreciated! However, I would have been pretty terrible as I lack that really ruthless streak you have to have to make it work

      • rod jamieson rod jamieson says:

        Yes, your right, it’s your very old friend Roddy! I was wondering if you would recognise me after 45 years. Think it may have been the Jaffa cakes remark that did it. No , you did’nt have a really ruthless streak, not even slightly and all the better for it.
        I moved from Winchmore Hill a little while ago due to retirement. I’m now in Newcastle u Lyme. Feel free to contact me through my email if you wish.

  6. Absolutely spot-on, Jerry. RDR, as it’s know, is a complete bureaucratic nightmare – the last in a long line of nightmares for IFAs. None of the really huge number of rules for IFAs have made much difference – bad firms and people still do bad things – and often get away with it if they have the right paperwork. Also killing IFAs is the compensation fund to which they contribute far too much – but that’s another story.

    We’re probably selling up along with many other smallish IFA firms. It’s such a pity that our niche – ethical investment – will be very poorly served by the banks.

    Surely it’s not too late to mitigate some of this?

  7. harry Benn harry Benn's Pig says:

    Christopher H is right, I have absolutely no faith in financial advisers’ abilities at all, if they were so good at it they’d be doing it for themselves.
    Every time the bank offers me a “product”, be it insurance, savings or investments, I can always find better/cheaper terms myself.
    Maximise your tax free allowances they say, it’s all chickenfeed anyway, the best investment I’ve always found has been in my own business and efforts; not always as lucrative as, say being a politician or barrister, but the bank’s 4% per annum tops, it’s a bit like bondage; not worth getting out of bed for, especially as you’ll probably be well tied up anyway.

    • Jerry Hayes Jerry Hayes says:

      You are quite right about the banks, particularly in the light of King’s comments. However, I’ve always been well served by my IFA who as been a friend for many years.

  8. Colleen Colleen says:

    Flipping heck. Can we not repeal or abolish everything Brown and co did during their thirteen disastrous years?

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