JOB OF THE WEEK

Although FSA rather stole ABI’s thunder by launching the RDR on the same day as the 2008 ABI Savings Conference, this diary-clash did not prevent representatives from government, the opposition, industry and other stakeholder organisations from filling London’s Congress Centre recently to discuss the lowest levels of personal savings seen in the UK for 50 years.  

Stephen Haddrill, ABI’s Director General, opened the conference by commenting that after 10 years promoting consumption, the government now recognises the importance of savings!   Glancing around the hall, you could almost read the thought bubbles that began to materialise above delegates’ heads in cartoon-like fashion - ‘about time too’, ‘hurrah’, ‘at last’.

Stephen observed that, despite now being a very bad time for people to be without savings, many people are choosing to repay debt rather than save.   In his view, our economic recovery must be re-built on long-term savings as these are what will provide the stock market with the equipment it needs to pull us out of the current recession.  He is undoubtedly right on both observations, but what would conference conclude, I wondered, and what should consumers be encouraged to do?  Spend or save?  

The queues outside Northern Rock earlier this year were cited as evidence that people still do not trust or understand the UK compensation scheme and the theme of trust was continued by the next speaker, Otto Thoresen, Chief Executive of Aegon UK.

Otto called for a return to the ‘jam jar’ mentality and a cultural shift towards the savings habit.  He called for the industry to put itself in its customers’ shoes and for people to be made to feel good about saving in the same way that they felt good about borrowing.  Advisers, he declared, will be fundamental in bringing about this change of culture.  Hurrah!  Unequivocal recognition of the value of advice, I smiled as the hall emptied for lunch and Blackberries were awoken from their slumbers and quizzed eagerly for news of the latest RDR developments being announced just a short tube ride away across town.  

More support for advice was offered by Chris Grayling, Shadow Secretary of State for Work and Pensions, who lamented the extra work caused for advisers by what he considered to be the undermining of the pensions system over the last ten years and the RU64 rule which, in his view, has stopped people from getting advice.  

The keynote speaker, Economic Secretary Ian Pearson, referred in his speech to the Treasury’s two main concerns with regards to pensions – encouraging people to save and having the right range of products and guidance available for them –but inevitably the first question put to him during the ensuing Q&A session was  ‘Well, what should we be doing?  Spending our way out of the recession or saving?’  The answer was that pumping money into the economy was the right thing to do ‘at an aggregate level’ – it is up to individuals to decide what to do with their money.

So, as I stepped out of the Congress Centre into the chill November twilight and mingled with the ‘spenders’ out Christmas shopping in London’s West End, the overwhelming messages of the day were that the only certainty right now is uncertainty and that advice is fundamental if UK plc is to be put back on the road to recovery.

Will the G20 Summit about to start in Washington arrive at a position strong enough to help the world economies turn a potentially long and painful recession into a shorter and shallower one? The Prime Minister yesterday met with several leading economists in New York as a showcase for his calls for tax cuts and a global spending stimulus. So what is the impact on the UK economy and those needing advice?
 
This has been a particularly bloody week for the UK as over 17,000 jobs have been slashed. While many are directly attributable to the Credit Crunch, some, such as in BT and Virgin can be seen as market restructurings. However, with RBS announcing plans to shed thousands of jobs, it looks like financial services has a significant amount of restructuring to go through too. This is even before the Lloyds TSB / HBOS deal is sealed - as the redundancies that will need to be driven through there will also be substantial if the promise savings are to be realised.
 
The two men responsible for running the tax-payers interests in those UK banks taken into "conservatorship" have now set out their role as they understand it. Far from being active, whip-hand holding, interventionist directors, they see their role as being one of protecting and creating value for tax payers. Indeed, they will have a more hands-off policy on executive remuneration policies than many would have expected - and this will certainly cause a degree of controversy, after all, where would these senior bankers go?
 
The G20 meets at a pivotal moment in history and the course of this recession will be determined by how this meeting goes. It may all seem distant from the day to day matters currently occupying most firms and members but its impact is enormous.
 
There are certain to be calls for change - not least of how the market is regulated. It is a well-worn track but we must keep repeating that further regulation of the retail market looks less than helpful. The UK system has been heavily regulated for years and we still find ourselves in the midst of the storm. We need more effective supervision, better risk management of regulatory risks, and a clearer focus on the big risks - and far less nit-picking, technical-foul, style regulation that has just added cost to good IFA firms for years.

In my time as Director General, I have worked to ensure that AIFA has good, businesslike relations at all levels of the Conservative Party. The success of this approach will stand us in good stead as, and when, there is a change of government. So this blog comes from the Conservative Party conference, where I've been meeting with several shadow ministers to put across the value of independent financial advice and the role of the IFA profession.

I met with Philip Hammond MP, Shadow Chief Secretary to the Treasury, for a lengthy briefing meeting where we discussed the current state of the markets, the credit crunch and its impact on consumers, firms, and the growing need for advice. We talked about the need for concerted action across the European member states to fix the crunch - and the need for a better approach to European regulation. It has always been AIFA's view that regulation should be the last resort not the first tool reached for from a government's toolbox. Given that 70% of new regulatory proposals spring from Brussels, it is essential that the UK makes its presence felt and views known on better regulation. Given the state of the markets, it is widely expected that Brussels will call for more, and heavier, regulation of financial markets, this will increase costs on firms. My view, plain and simple, is not that we have had a deficit of regulation - but that it has been ill-focused regulation. Rather as confusion comes from being given too much data and too little information, we have seen over-regulation of the wrong things. This has produced activity and the illusion of efficacy.

I also had the opportunity to meet with Mark Hoban MP and Justine Greening MP, both Shadow Treasury Ministers. Mark is well known to members, having spoken at several AIFA events over the last couple of years. Our discussions focused on advice, the Retail Distribution Review, and the impact of the downturn on firms. There was a genuine interest to hear how IFAs are advising clients, who risk seeing investments tumble in value, and who may start to complain unless the long term nature of investing is set out for them.

Nigel Waterson MP holds the Shadow brief for Work and Pensions and is now a recognised expert on the pensions market. We discussed the difficulty IFAs face around contracting out advice, advice on pensions in the group market, and, of course, the journey toward Personal Accounts. There are fewer issues of such long term importance, where advice is of such note, and the Conservative Party has shown itself eager to hear AIFA's views.

During the Conference I've also met with Mark Francois MP, who is Shadow Minister for Europe. We had a long discussion on the implementation of MiFID and the likely review of the IMD. Worryingly, I hear that Brussels will have a review on the failings in regulation that have led to the current turmoil.

I met Alan Duncan MP, Shadow Secretary of State for Business, Enterprise and Regulatory Reform. Over lunch we discussed the need for greater access to financial advice, the markets, and what policies are needed to address the issues we face.

The conference still has a few days to run but I've already secured follow up meetings to provide more details on the subjects discussed.

AIFA is most successful not when we respond to the regulatory ideas of others but when we are helping to shape the ideas that build public policy - as it is policy that works its way into the shape of future regulation. By lobbying the politicians we can help protect the long term business interests of members and so deliver lasting member value.