When it comes to the ban on cold calling, the heart is in the right place but unless it is improved significantly, the proposed bill could do more harm than good.
"The reputation of the financial advice industry suffers due to the misdeeds of a few rotten apples as well as those of a shadow army who hold no advice permissions and lurk on the fringes."
A quick fix
For years, there has been a serious problem with poorly-conceived, poorly-constructed and sometimes down-right fraudulent investment schemes. What is more, they have been promoted through pushy, devious and all-too-effective cold-calling sales techniques. So you would think we would welcome a ban on cold calling – and in principle we do. If only it were so easy! This is a quick fix that fails to get to the root of the problem and carries significant risks that it will not achieve what it sets out to do.
Consumers are understandably and rightly angry when they find that they have been suckered in, only to suffer painful losses while the rogues have taken huge proportions of the sums invested for themselves, dooming their schemes to collapse but with no real consequence to themselves. Worse still, some have managed to repeat this trick several times.
Others are aggrieved, too, because consumers are not the only victims. The reputation of the financial advice industry suffers due to the misdeeds of a few rotten apples as well as those of a shadow army who hold no advice permissions and lurk on the fringes. Adding painfully to the injury is the fact that honest advisers in effect provide bail outs for something they were not involved in through their FSCS levies. Providers understand their feelings all-too-well as they suffer exactly the same too, including the expense of trying to weed out investment scams.
So what is wrong with the ban?
There are problems with the detail: the current wording of the proposed amendment to the Pension Schemes Bill. It is a blunt instrument which, for example, makes no reference to investments. Nor, for example, does it restrict its scope to those not involved with administering pension schemes.
"If parliamentarians think this quick fix will allow them to make a show and then move on to other matters, consumers, advisers and providers will continue to suffer."
The result of that could be to make it difficult for pension trustees or administrators to fulfil their statutory obligations or more general duties of care. For example, it is far from clear that communications to alert scheme members as to their approaching retirement date, their retirement options and the things they need to take into consideration would be excluded.
The crux of the issue
There is also a potential problem at a macro level. If parliamentarians think this quick fix will allow them to make a show and then move on to other matters, consumers, advisers and providers will continue to suffer. A lot more effort is needed to get to the root of the problem. It cannot be addressed without making a firmer distinction between good advice/administration, honest mistakes and deliberate criminal intent.
Reform of the FSCS is absolutely fundamental, too (which is why we welcome the FCA’s review of the FSCS including the functioning of the PI market). Its funding currently falls on the honest, not the guilty, and it is being used too widely: it is not for compensating the victims of crime. By contrast, fines for financial misconduct, whether levied by the regulators or the courts, would be a suitable source of compensation.
A comprehensive solution please!
If the bill is brought into sharper focus and forms part of a comprehensive and coordinated series of measures, backed up by active policing of the rules and appropriate prosecutions, we will welcome its modest contribution.