It is not a little ironic that the day after the publication of a report suggesting the industry take steps to boost consumer trust in savings at least one national daily newspaper reports of another FSA investigation into potential wrongdoing.
Perhaps that is why there has been so much scepticism around the publication of Rickard Sykes’ report Restoring Trust: Investment in the 21st Century.
Certainly, reaction from those representing big providers, such as the ABI, have been muted, citing need to study further the recommendations, chief among them that the industry should introduce a sort of Hippocratic oath along the lines of the medical profession.
Or could it be that the industry does not like what Sykes is asking: to hold up a mirror and force people to look over practices and protocols in order to improve consumer trust in financial services?
Then again, that is pretty much what the FSA has been doing, and it is apparent from off-the-cuff comments just how popular those moves have been with some.
However, what really seems to be the key to the reactions to Sykes’ report is it essentially argues again for self-regulation.
Hyping up the language used will not affect those working in an industry where government has shown it is all in favour of clamping down on what it sees as poor behaviour by introducing new laws.
Industry players must be asking themselves whether it is worth the bother wasting energy on self-regulation, at a time when this is akin to running headlong into a series of brick walls – FSA, Treasury, Brussels, etc.
Sykes makes the point that self-regulation “works” in the drinks and construction industries, which indicates he has never been in the average UK town on a Saturday night or has ever reviewed the statistics on illegal labour employed on construction sites around the country.
Self-regulation is also an interesting point from a former chairman of GlaxoSmithKline, a firm currently accused by prosecutors in the US of hiding clinical data about one of its anti-depressant products marketed at children.
Then there is also the not so small issue of consumers themselves behaving properly.
It is curious that while much political capital is being expended on ventures such as PFEG, the Personal Finance Education Group, there is little noise about the corollary, which must be that consumers are acting irrationally, otherwise there would be no need for organizations such as PFEG.
And if consumers are acting irrationally, it makes no sense to seek further moves by an industry to boost “trust” as most regulated entities are already hemmed in as to what actions they might be able to take in any given situation.
Of course, it makes business sense to support better personal finance education in the UK: once established it becomes harder for consumers to claim ignorance and seek redress, which should, in the very, very long term, act as a brake on rising costs of business insurance.
Perhaps the biggest problem with Syke’s proposals is his reference to trust in the medical professions.
With doctors currently accused of sending women to prison on the basis of trumped up theories of infanticide, consultant specialists continuously complaining they are not being paid enough compared to what they could earn from private clinics in North America or elsewhere, and the NHS stripping third world countries bare of their ablest nurses, now is perhaps not the time to make such comparisons between financial services and medicine.
Hippocrates may have laid the foundation for the idea that a doctor’s first role is to provide help to any ill person, but he also lived at a time when disabled children were exposed, women were sold as chattel, and acceptable behaviour between sexes young and old were considerably different.
Thus, Sykes views may yet be proven to contain much foresight, but they may unfortunately find little support from most people’s current views of what needs to be done to increase trust in financial services.
Building trust with consumers may be possible, but it is going to be a long, hard slog, and likely take a bit more than commitments to decent behaviour.IFAonline
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