Act has nothing to do with consumer protection

From Charles Banbury

In response to your story on CP159 in Mortgage Strategy December 16, what all this shows is how wrong the regulators have been.

When I entered this business in 1978 the way to deal with competition was to select the best product offered by providers. You did not have to be a rocket scientist to work out that non-allocation, capital units and initial units was not to your client&#39s advantage in the event of early encashment or surrender of a saving or investment.

If you could not sit with the client and calculate a break-even point assuming a growth rate range of 7.5% and 10%, then the contract and the product provider would be seen as poor value. We were free to choose between unit trust and profits except for mortgages, which was dictated by lenders.

The only &#39whole of life&#39 contract to place was an open-ended one whereby all penalties ceased after 10 years. To place a straight whole of life contract meant the sales person was more concerned with his commission.

There is nothing wrong with these contracts. What we should be looking at is product providers and how they structure the contract, their attitude to risk and regular reviews.

As a vehicle for long-term planning they are effective in reducing the aggregate cost of medium and long-term borrowing. Added to the above, portability is being left out of the current hysteria from certain consumer pressure groups. There is more straight term assurance being written now than when I entered the business – because of the regulators. For clients on a high or low income it is always better to place convertible term assurance because of the options to convert with the need to prove your state of health.

The 1986 Financial Services Act is being used as a sledgehammer to crack a nut under the guise of consumer protection. Nothing could be further from the truth. Some us do believe in service above self. We do not get a bean from the FSA yet it is driving up the cost of remaining in business as a sole trader.