Nationalise financial services?

Nationalise financial services?

We hear that The Competition and Markets Authority (CMA) has announced that energy suppliers will soon be forced to open up their consumer databases to allow competitor firms to offer those on standard variable rate tariffs better deals.

The CMA reckons that some 70% of the great British household ‘consumer collective’ could have been overpaying by around £1.7 billion a year or in CAM speak, consumers ‘could save up to £300 per year’.

That is assuming those consumers really do care, something that may not actually be the case despite the good work of the CMA.

There are many reading this who will have recalled the days when electricity and gas was provided by their supplier, then referred to as a ‘board’. Yes a board, not a company.

Power by way of gas and electricity was ‘homemade’ and the supplier was in fact the government by way of a nationlised utility. The same supply rational applied to water, telecoms, the rail network, health service, airports, air traffic control, the post office, coal, steel…..I could go on.

Without getting too political, nationalised management of utilities, key industries and services was not without its problems and it may be worthwhile to ponder the pros and cons.

And that ponder may induce more than a wry smile

Perceived Advantages

Benefits from economies of scale on the assumption that bigger is definitely better. That should see prices to consumers being relatively lower than if we had a number of smaller privately run for profit firms.

As they are owned, run and controlled by the government, this will stop consumers being exploited. The government can manage the economy better by ‘controlling’ the important utility and key industries. The government can invest money and make those services more efficient. Utilities and key industries owned and run by the people for the people take social costs (pollution, staff welfare, retirement benefits etc.) into account and the profits made go back to the ‘people’/ state.

Perceived Downsides

Low performance when ownership is in the public sector. Managers and employees do not work for profit and so their performance and efficiency has a perceived tendency to remain poor.

Lack of competition that is necessary for development and increasing innovation and production. Nationalisation historically has decreased the spirit of competition.

Favoritism.The management of nationalised industries will provide jobs to their politically favoured few because of government influence upon those state utilities and key industries.

Smiling wryly yet?

I am reminded of a now infamous George Best story about a waiter delivering an iced bucket of champagne to the late, great George Best’s hotel room.

On seeing thousands of pounds of casino winnings along with the then current Miss World both arranged very tastefully on the bed, the scene prompted the waiter to ask, “Mr., Best, where did it all go wrong?”

Some years later Best observed: “Perhaps he saw something in me that I didn’t.”

And that is the analogous point of this whole mess.

De-nationalisation needs regulation, nationalisation does not.

In light of the now completed FAMR exercise and last years FCA suggestion that consumers should be able to view all their lifetime pension savings in one place, would the creation of a ‘Pension Dashboard’ look like the first step toward a nationalisation of the financial services industry in the UK?

Just a thought that may have been missed in the deliberations?

Money laundering, mythical beasts, oligarchs and data dumps

Money laundering, mythical beasts, oligarchs and data dumps

The Chupacabra is a native creature of Panama. The name comes from the animal’s reported penchant of attacking, killing and then drinking the blood of it’s prey, often goats.

Please humour me for a few paragraphs while keeping this thought in mind.

It has very recently come to light that offshore companies now own more than £200bn of UK residential property.

The Land Registry released, in April, a complete list of 40,000 offshore companies that own nearly 100,000 properties in England.

Many of these are in the most affluent areas of the country. London in particular. And a number of the individuals behind these companies would appear to be Russian ‘oligarchs’ although I am sure that in BBC speak, “other nationalities and/or job descriptions are available” to buy.

If you want to buy a car, house, open a bank account, get a mortgage, engage a lawyer or an accountant there are a number of hurdles us mere mortals need to overcome.

Buying a house with a mortgage requires very significant levels of checks these days if you are a mere UK resident.

Without a mortgage, it would seem, sees a very different picture, especially when ‘oligarchs’ and associated trades are involved in the vast movement of ill-gotten or plundered wealth.

It does seem to be the case that Animal Farm ‘Orwellian’ rules apply with some people being more equal than others.

The FCA clearly scratched the surface last year when it fined Barclays some £72,069,400 for failing to “minimise the risk” that it may be used to facilitate financial crime. For the record, the fine was the largest fine imposed by the FCA and its predecessor the FSA for financial crime failings.

The FCA said “Barclays did not obtain information that it was required to obtain from the clients to comply with financial crime requirements. Barclays did not do so because it did not wish to inconvenience the clients”.

So the big question here is, what checks are made when foreign oligarchs, despots, drug barons, dictators and other offshore potential ‘shady’ types buy billions of pounds worth of UK property?

Why is it that in the UK, the first, possibly only checks are about if you are who you say you are with proof by way of an original document selection from a list such as a passport or drivers licence, council tax and utility bills rather than a requirement of proof by audit trail of where the money has actually come from, ignoring any sensitivities that could fall into the category of “not wishing to inconvenience the clients”. 

But wait, a simple money laundering web-based solution is now at hand to assist the ‘authorities’ in that process.

A scan through the Panamanian law firm Mossack Fonseca’s recent , largest ever, leaked data dump should suffice, showing how clients too important to question or upset let alone inconvenience, can launder money, dodge sanctions, evade tax and avoid inconvenience.

And that brings me back nicely to the Chupacabra.

In this case it manifests itself in the form of many of Mossack Fonseca’s clients whose ‘fiscal blood sucking’ activities have been well and truly exposed.

In future will the computer say no?

April fool, decide for yourself?


April fool, decide for yourself?

All advisory firms in a post RDR world have had to look carefully at their proposition, segment their client base and decide what to charge their clients taking into account the underlying costs of running their business.

This would include things like staff cost, regulation, accountancy, capital adequacy, legal, utilities, insurances, office premises, FSCS, taxes, NI, pension contributions etc.

These numbers would then be incorporated into some P&L software and in Mr. Micawber speak, doing the ‘math’ on the tried and tested formula of “Annual income twenty pounds, annual expenditure nineteen pounds nineteen shillings and six pence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds and six pence, result misery”, and see what the outcome is for them.

Financial advisers in fee block A013 may be interested to know that for the fee year 2015/16 the latest forecast for FCA regulatory fees to be invoiced was £74.85m.

So, with this thought in mind, we asked if the regulator could confirm what it actually costs to regulate this group of adviser firms.

The reply should be the cause of some concern.

  • Dear Mr. Bradley
  • Freedom of Information : Right to know request
  • Thank you for your request under the Freedom of Information Act 2000 (the Act) for information aboutFCA Regulatory Fees, specifically:
  • The amount levied in FCA regulatory fees for firms in the A013 category (Advisory only firms and advisory, arrangers, dealers, or brokers) in 2015.
  • The actual cost incurred by the FCA for regulating those same firms in the A13 category (Advisory only firms and advisory, arrangers, dealers, or brokers) in 2015)”
  • Following a search of our paper and electronic records I am writing to tell you that we do not hold the exact information you are seeking, for the reasons set out below.
  • Point 1: We have still to complete our invoicing for the fee year 2015/16, but our latest forecast for FCA regulatory fees to be invoiced in respect of A13 fee block for the period is £74.85m.
  • Point 2: We no longer carry out an exercise where the actual costs are calculated against each fee block compared with the fees invoiced. We consulted on stopping this exercise, referred to as a ‘true up’ exercise in CP10/5 (March 2010) Chapter 9 paragraphs 9.16 to 9.20 We did not receive any objections to that proposal.
  • The amount of our annual funding requirement (AFR) allocated to fee-blocks is based on where we plan to use our resources in the next fee-year. We consult on the fee-rates to recover these allocations in our annual March fees-rates consultation paper (CP) and feedback on responses in a June Policy Statement. For 2015/16 the allocation to the A013 fee-block was confirmed as £74.9m in Policy Statement PS15/15 Chapter 2 which includes our feedback on responses to the March CP.


If I may draw on another Dickens quote from ‘Little Dorrit, “I am the only child of parents who weighed, measured, and priced everything; for whom what could not be weighed, measured, and priced, had no existence.”

The FCA, who seem to have a data metric on just about anything and everything cannot quantify what it costs to regulate this fee group?

I find this hard to believe. A regulated firm would not be deemed fit and proper if it had no idea of what it costs to run their business.

The time has come for some openness. To simply say that “We no longer carry out an exercise where the actual costs are calculated against each fee block compared with the fees invoiced” is just not good enough. This is a simple P&L exercise surely?

And as for not getting any objections to their ‘true up’ exercise, I think they should assume that they might well have one or two now.

This is NOT an April Fool.

Being a cynic means never having to be disappointed (apologies to Love Story)


Being a cynic means never having to be disappointed (apologies to Love Story)

The wisdom of operating this mindset was further ratified upon reading the FAMR Final Report. The aspect that most interested me was how the carefully selected panel dignitaries (comprised mainly of theorists) would deal with the persisting issue of the 15-year longstop.

For those whose memory fails them let me remind that this legitimate defence of stale claims, one that other firms and individuals are fully able to rely upon, was summarily removed when the FSA set out the Ombudsman operational rules. Parliament did not discuss or debate the matter and consequently did not vote on its removal. In fact, most MPs remain unaware that this legal defence has been removed and are shocked when told. The FSA’s legal counsel stated that in his opinion it was Parliament’s intention that the 15-year longstop be removed from financial services. When asked for sight of this legal opinion the regulator refused, and continues to do so to this day.

I and a number of others responded to the FAMR ‘consultation’, hoping that for once it might disprove the notion that respondents’ are treated with contempt. However, the rational explanations of why financial services should not be singled out for this loss of human rights fell on deaf ears, or maybe they were listening to the siren voices of the FCA Consumer panel, which was nicely represented on the committee.

As with the sham RDR consultations the FAMR determinations are couched in weasel words where we are assured that the “FAMR is sympathetic to firms’ concerns” and are told why the loss of the longstop must be maintained. Apparently only 216 complaints that reach the Ombudsman fall outside a 15-year period and only 30% (64) of these are upheld.

We are again treated to the view that the financial services industry is a special case and that the long-term nature of advice, blah, blah. Architects, surveyors, builders, politicians, regulators and many other occupations provide advice or services where a negative outcome could eventuate more than 15 years later. In fact, with politicians and regulators it is a fact that most of their decisions end badly.

This is life, things go wrong. The courts and the politicians decided thirty years back that 15 years represented an appropriate balance between the obligations of firms and the rights of customers yet the FSA/FCA is apparently wiser than either Parliament or the judiciary.

When we analyse the FOS complaints figures we find a few interesting matters. Most mortgage endowment cases are now time-barred or had compensation paid so their relevance is waning. Products like SIPPS are relatively new in terms of their take up and long-term care plans have been out of favour for many years so the FOS figures actually mislead. The FOS has a huge budget for advertising, or ‘outreach’ as it prefers to describe it. They will say that they are raising awareness of their service, others might reasonably suggest they are advertising for new business.

The FAMR final report also suggests that the current 3 and 6 year rules serve the industry okay. This is palpably untrue. The rules state that a complaint cannot be levelled more than 6 years after the event complained of or, if later, 3 years from the point at which the complainant knew or ought reasonably to have known that there was a problem.

All well and good except that it is the FOS that determines what “ought reasonably to have realised” means and how this elastic concept is applied. I know of mortgage endowment cases where an insurer has written to a policyholder advising that his plan is off course and that remedial action is required to bring it back on course. You might think such a letter sufficient to trigger, in a reasonable person’s mind, the need to review matters or, if appropriate, make a complaint. The FOS believes otherwise and the 3-year rule is actually a variable time-frame that can be indefinitely extended at the FOS’s discretion.

What about Statutory Instrument 2326 which the Treasury introduced in 2001. This was introduced to ensure that the FOS would use pre 2001 rules when determining complaints regarding pre 2001 advice, so that old complaints would not suffer the new rules and determinations. The FOS ignores SI2326 in every instance, a clear case of an unelected quango treating Parliament (and the industry) with contempt.

Finally, let’s scrutinise the mendacious suggestion on page 58 of the report that financial advisers are joined in their loss of rights by doctors, accountants and solicitors.

Only six accountancy bodies operate a complaints service and, unlike advisers, anybody is allowed to trade as an accountant. Non-body members do not have to operate a complaints system. However, even those accountants who do operate such a system do not have to deal with negligence complaints because these are not covered and have to be dealt with through the courts.

Similarly, with solicitors, where allegations of misconduct must be levelled within 6 months. In other words, they have a 6-month longstop.

The General Medical Council can only look at complaints made within 5 years of the event (a 5-year longstop) so any linkage between these professions and advisers is at best tenuous and, most likely, duplicitous.

In short, the report has solidified the suspicions of many advisers that it was a done deal way before the call for evidence and that we are dealing with a venal organisation intent on forcing its uninformed views on a section of society too disparate to fight back in any meaningful way.

APFA is shackled by its inadequate finances and the fear of rocking the boat. Unless the industry stands together and unites behind a figure, such as Garry Heath, then we probably deserve to be treated with contempt because, as history tells, anything worth having has to be fought for.