For years, brokers have borne the brunt of criticism from governments, regulators and by association the general public after a number of financial scandals.
There are a few of these to choose from. The 1970s and early 1980s saw the early days of equity release which was fine until the market faltered. Mis-selling was diagnosed.
Later in the 1980s we had the endowment mis-selling scandal, in the 1990s it was the pensions mis-selling scandal and more recently you can take your pick of scandals ranging from payment protection insurance to precipice bonds.
In some of these cases the criticism the financial services industry received was justified but in some cases it was not.
For example, the pensions mis-selling issue was a travesty. The industry was left holding the baby after a monumental screw-up by government actuaries designing the national pensions regime. True to form, it was brokers who got most of the blame.
But the tide may be about to turn. It seems that for the past four years the Financial Services Authority has been fighting a legal action to keep information secret relating to those insurers who mis-used the old Life Assurance Unit Trust Regulatory Organisation projection figures to work out premiums.
This resulted in many customers being given unrealistic projections for their policies. Claims for compensation met by the advisers who wrote these policies are being challenged. Advisers are angry that unrealistic projections led to mis-selling payouts that would not have been made had the projections been correct.
So for years I have maintained that actuaries were to blame for the endowment issue. These supposedly highly qualified professionals go to university for years to learn how to guess accurately but the moment the market doesn’t go the way their text books say it should they are revealed as no better than the rest of us at guessing.
In the late 1980s I worked with an insurer that revalued its 25-year projection figures three times in two years. Consequently, many clients revalued too cautiously and claims for mis-selling were triggered.
I have no idea why the FSA is fighting this. You’d have thought the regulator would have learnt a lesson from the recent crisis – that brokers are not always the villains of the piece and it sometimes pays to look elsewhere.