Personal Pensions (Hansard, 7 July 1998)

§ Mrs. Liddell

Today, I have met senior representatives from large firms of independent financial advisers (IFAs), and the IFA networks to emphasise the priority the Government attach to early action to put right past mis-selling and to ask them to take personal responsibility for their firms' actions. Together, the 30 firms invited account for over half the IFA market.

Last year, I called in senior representatives from over 40 large firms, mostly life insurance companies, to give them the same message. I have been reporting to this House on their progress, most recently on 17 June 1998, Official Report, columns 208–10.

At last, most of those firms have now made big strides—both in terms of their actual progress with the review and in their attitude towards the review.

The picture in the IFA sector is strikingly different. Little progress has been made by many IFAs, and all too many firms still seem to have the attitude that their inaction is defensible. I have been particularly troubled to see how many IFAs, when faced with the second phase of the mis-selling review, have chosen to blame everyone except themselves for the problem. The truth is people have lost out as a result of having been sold products that 433W were wrong for them. IFAs have a clear responsibility to sort out whether any of their customers deserve redress as a result and to make redress where that is warranted.

Yesterday, the Personal Investment Authority announced disciplinary action taken against 41 IFAs for failings connected with the pensions review. This makes absolutely clear to all IFAs that discipline is a real prospect if they fail to deal with their cases. IFAs' reviews must be tackled with professional diligence and businesslike rigour.

IFAs rightly make much of their independence, their ability to provide impartial advice as agent of the customer, to offer a full financial planning service, and deliver ongoing customer care. The reality as displayed by many firms' conduct in the pensions review is that, all too often, the customer is neglected. Failure to take reasonable steps to identify cases, failure to conduct reviews properly, inadequate resourcing, and ultimately failure to resolve and redress cases. All these failings are failures of customer care. In the long term, if the IFA sector fails to put its house in order, and genuinely command the trust of customers, it will call into question not only the viability, but possibly the desirability, of the current industry structure.

In my opinion, people should think long and hard before using an IFA. Some have clearly set their faces against doing a proper job of finding and putting right past mis-selling, and hopelessly poor progress has been made by others. My recommendation to anyone thinking of taking advice is to check out the IFA thoroughly. Check their attitude to the consumer protection that regulation provides, and to putting right past problems—including their progress with the pension review. Ask if they have ever been fined or disciplined by the regulators.