Financial Services Authority Does it Again...Not

The FSA has issued its latest design brief for the FS 'market', called the Retail Distribution Review - 'RDR' for short.

It's flawed. Why? Because it is impossible to design a free market. The RDR is just the latest iteration of the FSA's (the Government's poodle / attack dog) manual for more nationalisation lite.

Anyway, if you want to 'reform' distribution of product it can be set out on one side of A4. Tabulate the differences between those distributors who are the agents of the client and those who aren't. This will mean that all IFA's will be on one side and everyone else (Banks, Building Societies, Insurance and Investment companies etc) on the other.

Make it clear to everyone that IFA's sell advice, not product, and that products will occasionally be supplied as part of that advice. Secondly make it equally clear that every other market participant is selling product and that buyers should beware - caveat emptor applies. Thirdly make it compulsory to disclose the true full costs of distribution and commission on all product sales.

The essential message is that every product seller who is not the client's agent is not to be trusted and their product recommendations should be viewed with suspicion.

I mean, how hard can it be?

Brown to "Cut Taxes to Boost Economy"

Headlines today; 'Brown to cut taxes to Boost Economy.'

Excellent. An admission that taxation reduces the economy.

Next step. Cut State sepnding.

I mean, 'how hard can it be'?

More Regulatory Ranting...

We work with the 'regulator' of financial services and it is becoming more dysfunctional by the day. I think it thinks (knows?) the game is up for the Brown regulatory system.

In the last 12 months I have met FSA representatives twice, in open meetings, and challenged them on their proposals for Treating Customers Fairly (TCF) and the upcoming Retail Distribution Review. Both of these are unworkable since, for the former it depends on who defines what is 'fair' - impossible to do fairly (!) - and the latter 'designs' the market for retail financial services, also impossible. When challenged on these arguments the FSA people could not produce a sound philosophical rationale to support their proposals. They knew they were flawed, but as relatively junior people they no doubt do not have the power to do anything about it.

Ultimately the FSA rule book operates as a form of 'nationalisation lite' which goes a long way to explaining why it will, and has, failed.
It therefore does not surprise me at all that it is now carrying conflicting actions in regards to retail banking.

The trouble with the Brown type of overweening regulation is that it encourages the regulated to abandon common sense and abrogate responsibility by slavishly relying on the regulatory rules to run their businesses rather that adopting sound business practices. If some financial product passes the compliance check it must be OK. The fact that these bad rules are enforced by a Draconian and unaccountable and arbitrary fining process just reinforces the surrender of management responsibility because even if you put right an honest error you will get castigated.

So a key part of getting the banks working again is to wholesale reform the Brown inspired FS regulatory system

The Blogging Party is Here! (UK Version)

The Launch of the Blogging Party

I hereby officially launch a new force in UK politics, The Blogging Party. This is in direct response the asinine statements of that fanciable fathead Hazel Blears on the nihilistic politics of bloggers.

The party's political stance can best be described as Anglo Saxon Mixed Race Non Internationally Interventionist Libertarian Democratic Judeo Christian free market socially just, thrifty and responsible with compassion and with a firm commitment to the rule of English Common and Commercial Law and the sovereignty of Parliament. It will also by definition have a very highly developed sense of the ridiculous and be able to laugh at itself. It has no ambition for power, holding to the Spike Milligan view that anyone who wants power (or a handgun) is constitutionally disqualified from having it (or owning one).

Membership is free. Donations will be sought in due course to field candidates. The first of these should be by rights in HB's constituency of Salford.

If anyone can be remotely arsed in getting involved - because I am having difficulty retaining my enthusiasm even as I type this - can comment below.

New Labour Newspeak.

Investment = Spending
Key Workers = New Labour client state
Global Problem = Our Problem
Unfunded Tax cuts = Unfunded spending commitments
Hard working families = New Labour client state
Long term = Short term political gain
Stability = Do as your told
No more boom and bust = ?
'Let me be clear' = I am now going to either (a) lie through my teeth or (b) make no sense.
Tory Tax Cuts = Tory Tax Cuts (!)
'I am a pretty straight kind of guy' = 'I am a lying deceitful git'
Any statistic quoted by Brown = Total bollocks
'We are making available new money...' = It's the same money as before and it's your money.
'I have commissioned a full review' = 'I have kicked it into the long grass'.
'We will do what ever it takes' = '...to keep us in power/from getting found out'.
'Business friendly' = 'Business UNfriendly'

To be continued...

Norther Rock and Financial Regulation

Northern Rock

Northern rock’s problems have their roots entirely in New Labour’s Ponzi economy. As follows:-

Economic Management and the Transfer to the Bank of England for the Responsibility for Inflation.

The FSMA 2000 brought in Brown’s tripartite regulatory system. By now you will all have realized that this is a disaster. The division of responsibility never works. But the major (deliberate?) error was to target inflation to the entirely flawed CPI. This lead to rampant asset price inflation because the price of money was too low for too long. No account was taken of money supply or house prices. Hence we have a bubble and a huge amount of home equity withdrawal funding current spending. Marks out ten? 0.

Financial Regulation.

Enter the comedy that is the Financial Services Authority. Here we have the classic clueless Quango. In my view its political purpose was to (a) put all financial services problems at one remove from the Treasury and No10 and (b) to provide a type of ‘nationalisation lite’. Its powers are extensive and its rulebook prescriptive. And being as how it operates in a free market it is doomed to fail. Hence Northern Rock. Marks out of ten for Brown? 0.

The Hidden Effect of Over-Regulation.

If you over-regulate the over-regulated abrogate responsibility to the regulations. Box ticking to satisfy the regulators replaces the application of common sense. Consider Northern Rock. As a financial adviser one component of what I do is to seek out and arrange mortgages for clients. I admit it, I get them into debt. Now, I have been around in this business some time. When looking at house purchase for first time buyers Northern Rock offered some eye watering deals at up to 125% of current valuation. It does not take a genius to realise that if the housing market collapses both the lender and the borrower are in trouble. With house prices at levels never before experienced we have been advising against buying a house – especially if you are a FTB – for about the last four or five years. And we have never advised any client to do so with a 125% mortgage, always insisting that they had at least a 5% and preferably 10% deposit. Clearly we were in a minority.

Personally I have never given a stuff about the regulations or regulators. My view is that if you do the job right you will automatically comply. Doing the job right really means applying some common sense.

So we judged that Northern Rock was doomed. This is despite all the regulatory assurances that it was a sound company who knew what it was doing and was well financed. We are a micro business based in the provinces. What makes us so clever? Well, I do not think we are. What I think is that the pseudo confidence given by the strap line on all regulated businesses – ‘Authorised and Regulated by the Financial Services Authority’ – leads most people to abandon their own judgement. Hence they join the merry go round. Regulation is therefore the source of its own inflation. More and more regulation leads more and more people to stop thinking.

This lack of thinking applies in spades to most politicians of most colours but especially to Socialists. The answer of course is to severely reduce regulation and make caveat emptor apply. People will then think before they act and my peer group will not be so ready to steer clients to dodgy businesses just because they have regulatory approval.

Opposition. What Opposition?

Just to clarify my gloating position on New Labour I’d like to make it clear that I do not really have a major anti Socialism position. Socialism in itself is not intrinsically bad, I mean the whole point is to make life better. Totally flawed of course, but well meaning. No, what really gets up my nose is the deceit and hypocrisy which always accompanies it. I think this comes about because in their heart of hearts Socialists know that no-one with an ounce of common sense is going to buy into Socialism. The punters know, without necessarily being able to articulate exactly why, that it is flawed and will lead them into being made worse off in some way. Or if they do vote for it is because it’s tribal or because they see advantage, and that usually means power or benefits.

Since Labour tacitly accepted that Socialism was entirely flawed and abandoned Cl4.4.they have not been left with any coherent philosophy. All that is left is some woolly stuff about eradicating poverty and redistribution. Plus of course regulation, which has now become a sort of nationalisation lite. (You can take nationalisation out of the Socialist Manifesto but you can’t take it out of Socialists). This leads them inexorably to Big Government and Big Spending.

So now the party lines have become well defined not by an overall difference in ideology but by a simple choice. Big Spenders vs Little Spenders. Put like that who do you honestly think is ever going to get the most votes, especially as they are both going to be spending your money? Quite. And if put like that what chance will these latent Socialists ever have of getting into power unless they deceive you as to their true purpose? Quite again.

Enter the Great Deceiver and his sidekick. Bliar (the best and most appropriate mis-spelling opportunity ever) and McBean. The trouble is for Gordon that Bliar was a super salesman with charisma. Brown is just a great deceiver. The Voter is now just about finding out exactly what New Labour is. It’s a great big tax and spend machine. And that is why its poll position is so dire.

All this is very sad and rather worrying. Personally I do not want a one party state. Without a coherent opposition (witness the last 11 years) ruling parties get entirely carried away. A strong opposition is critical to a functioning and vibrant democracy. So once New Labour implodes on its tsunami of debt and deceit just where will this opposition come from?

We were let down by the Tories in 1997 when they imploded in sleaze now we are going to be let down by New Labour who are imploding with deceit and debt.