Wide support grows for stance against the flawed operations of the Financial Services Authority
TODAY’S column gives an opportunity to catch up with the letters and e-mails of support for my criticisms of the Financial Services Authority that readers have kindly sent.
The FSA celebrates its second birthday this month, having issued more than 200 documents – some of them running to more than 1,000 pages – and more than 23,000 pages of background notes.
Each new batch comes with a chilling admonition on every envelope that thuds through the letterbox: “Essential reading from the FSA”. Well, here’s some essential reading in return.
In the meantime, the Scrutineer column’s first FSA Fightback Strong Award goes to David Prosser, chief executive of Legal & General. Not only is he challenging an FSA ruling that would punish L&G for breaching regulations that were not in force in 1997-99, but he is also taking exception to the way that, as L&G sees it, the FSA is policeman, judge and jury over its procedures.
Now your letters. Firstly this, from an Edinburgh IFA:
I have read with interest your articles on the FSA and regulation in general.
Twenty years ago, 80 per cent of advisers’ time was spent in front of clients, with 20 per cent on admin. Unfortunately in today’s market these figures have been reversed.
The costs involved are astronomical and as you are aware there has been a great unfairness in it all. Certainly the institutions are finding regulation just as difficult with costs soaring and with reserves and margins having reduced greatly over the past few years. But they could and should have done something about this many years ago, particularly in relation to the 1 per cent stakeholder contracts. Unfortunately greed prevailed.
It is interesting that people making decisions or giving advice to the government have rarely been at the sharp end…
So please keep up the good work, it is very refreshing to have the press so well informed and just maybe we, as in industry, will begin to say “enough is enough” and not before time.
L Wood,
Coggans Wood, Independent Financial Advisers, Edinburgh.
And then these:
Excellent Scrutineer column. I hear that Scottish Enterprise is to be disbanded. I can only hope you will manage the same with the Financial Services Authority.
L Campbell, Crieff.
Great stuff on the Financial Services Authority. Regulation is the new tax – except worse, because its costs are hidden. It’s our greatest foe, and hardest to defeat.
TM, Edinburgh.
Keep putting the boot into the FSA. They richly deserve it.
IKL, Edinburgh
Finally, my condolences to an Edinburgh IFA who was recently sent a note on final conduct of business rules on mortgage sales (snappily subtitled: “Feedback on CP186 and made text”). This informs him that “We have decided to allow a tolerance in certain figures in the KFI (Key Facts Illustration) of GBP 1 or 1 per cent whichever is the greater where the illustration is used by a mortgage intermediary using a sourcing system.”
This has prompted him to ask what the tolerance was previously – 50p?
Keep’em coming!
Trailblazing SVM
THOSE looking in the investment trust sector for an innovative and distinctively different approach to value investment will be struck by the annual report just out from Colin McLean’s Scottish Value Trust. The GBP 120 million fund managed by Edinburgh-based SVM has struck out on a notably independent track with conventional holdings such as GlaxoSmithKline, BP, Shell, Vodafone and the usual high-yield utility stock suspects refreshingly absent from its list of top 30 investments.
Instead, McLean has gone for a rather eclectic choice of investments, ranging from venture capital funds through hedge funds to specialist emerging market vehicles such as JP Morgan Fleming Russia and Prospect Japan.
The geographic asset allocation is striking: less than third of the portfolio is invested in the “Anglosphere” of UK/US, with the Far East ex Japan accounting for 12 per cent and emerging Europe a further 2 0 per cent.
In terms of “theme” asset allocation, the split is just as arresting: 26 per cent of the trust is in hedge funds, 38 per cent is in specialist funds and 22 per cent is in private equity.
This is an allocation that will make many private investors gulp at the departure from the orthodox. But this is surely an intelligent re-invention of the founding principles of the investment trust industry: to provide a professionally managed platform of equity risk investments where private retail investors lack the knowledge or the skills to enter with confidence on their own, and which spreads the risk over a range of different holdings.
Does it work? The fund’s Net Asset Value is up 28.1 per cent in the year to end September against a 19.3 per cent rise in the benchmark FTSE World Index. And over ten years NAV is up 127.1 per cent against a 61.1 per cent rise in the benchmark. Well done, SVM. This is a trust well worth considering for investors looking for diversification and spread of risk.
