What will the financial services sector be like when the regulator can ban products and suspend their sale for up to 12 months, Lawrence Gosling asks.
Well frightening to my mind - because suddenly it makes financial services products sound as though they are infected with radiation or can give investors the equivalent of monetary salmonella.
In a survey of 530 people who attended the recent Chartered Institute for Securities & Investment's RDR roadshow around the country, 72% reckon the regulator should be able to do this. But do they really know what they are saying?
The CISI members were asked 'Do you agree that the UK Regulator should be given powers to ban retail products?', against a backdrop that the new Financial Conduct Authority will be able to do so.
Of course, the FSA can effectively ban products at the moment but less explicitly by issuing warnings ranging from comments about commercial property funds (a little too late) to ‘exotic' ISAs linked to fund of hedge funds.
In reality, market forces and better advice should mean there is no need for the explicit banning of products, particularly under RDR. But even when there is a banning order what would it achieve?
The disproportionate bad publicity for a single product would undermine the whole industry - not what is needed as we try and rebuild trust.
And whatever happened to consumers taking more responsibility for their own decisions? Would Madoff's products have been banned? Probably not because he got away with it for long enough with too many people realising what he was doing.
The current environment works quite well for all its faults and what will banning orders add?
And does this mean we are going to get the equivalent of ASBOs - perhaps they could be called FASBOs - Financial Anti-Social Behaviour Orders!
But of course that would be about 20 years too late, because if anyone really deserved a FASBO it was all those hard-nosed direct sales life companies running around in the 1980s selling endowments and personal pensions to people in the state sector.
We don't need product banning orders, just common sense and a formal system for product approval by regulators.
Why wait until a group has launched a bad product? Why not stop it in the planning phase and save everyone the time, money and loss of reputation?
Or is that too simple and practical?
Lawrence Gosling is editorial director of IFAonline.
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