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FOOL'S EYE VIEW
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So many things eventually boil down to politics and self-interest and none more so than the role of the Financial Services Authority in protecting the rights of the consumer. On the one hand, you'll find arch-capitalists, libertarians even, arguing that the free market should be allowed to regulate itself and that all governmental interference is evil and destructive. On the other hand, you get the unreconstructed old lefties, their leather patches wearing through the elbows of their jackets, arguing that private enterprise is basically immoral and the government should regulate it to the hilt, if not ban it. Most of the Motley Fool's users probably fall somewhere between these two extremes, so how should we react to the blistering attack on the FSA in last Thursday's Financial Times by the Director-General of the Association of British Insurers, Mary Francis? In it, she says that: "members of the Association of British Insurers [fear] that the FSA is starting to think of itself as the provisional wing of the Consumers' Association." As you'll see if you read her letter, she's none too pleased at the FSA's press release on its latest report, "Treating customers fairly after the point of sale", which she feels does not pay enough tribute to the strides the industry is making. She ends by stating that: "The FSA was not established as a consumers' lobbying organisation. It has duties, too, towards an industry that provides vital savings and protection products for millions of people. The danger is that customers will conclude that it is better to keep their money under the mattress. Is that really what the FSA wants?" So, she's not too happy because she feels the FSA is leaning too heavily on the financial services industry. I'm afraid that in this case, I have but one thing to say, Ms. Francis, and it is this: Prrrrrrrrrrrrrrrrrrrp! That was a loud raspberry, in case you didn't notice. Now, I'm not one to dig over old ground (gasps of incredulity and stunned disbelief from the Motley Fool editorial staff), but there's a very good reason why we need the FSA and it is no more nor less than the conduct of the financial services industry. This is an industry which is still far less than transparent, purveys poor value products, is still nursing its wounds from the pensions mis-selling scandal and parrying calls for an investigation into an endowments mis-selling scandal. This is not an industry which has heaped itself with glory in the last two decades, as it has sought to sell greater and greater value products to a public which it has tried to educate and make more informed about its financial affairs. On the contrary – and I really can't believe I'm here in a public forum having to restate this stuff yet again – it has been selling shoddier and shoddier products, for greater and greater fees, to a public which it seeks to mystify and deceive whenever it can get away with it. Thankfully, things are getting better and the industry can't get away with as much as it used to. In recent years, we've had the financial media (including and not least our good selves) banging away at the poor deal consumers get in this country and a government which at least tries to help people get a better deal (e.g. by introducing CAT standards and positioning the FSA firmly on the side of the consumer), even if it often doesn't do a brilliant job of it. All these factors, which have stoked the weight of public opinion, have backed the financial services industry into a corner, forced it to start listening to its customers and bring out some decent value products, of which we are seeing increasing numbers. This is a Good Thing, but it certainly hasn't been brought about by a spontaneous conversion on the road to Damascus. The financial services industry has had to be bullied and shamed into it, especially the insurance industry, for which Ms. Francis speaks, and which is the worst offender of the lot. No, it's far too early for the financial services industry as a whole to come out and start pretending they are the consumer champion and that the FSA is seeking to regulate them out of existence, thereby putting all our financial futures at risk. Words are cheap and we're not going to fall for this PR spin, which is barefaced, to say the very least. We need to see continued and sustained action on behalf of this particular offender, before it stands a chance of public rehabilitation and, even then, arrogant crowing and wounded pride are not going to cut it. We've had enough of that over the last 20 years. Ms. Francis, we welcome the positive things you and your industry are doing, but please have the decency to just get on and do them. We don't want you regulated out of existence, because we recognise the need to provide space for free enterprise and innovation to flourish, but until we can believe that you're not going to try and swindle us, I hope and expect the FSA will keep its beady eye fixed firmly on you. Let's see what the Motley Fool's readers think. Please answer this poll: How closely do you think the FSA should regulate the Financial Services Industry?