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| 2005: Brothers Grimm - Terry Gilliam |
Today is St Andrew's day and a day of strikes across the country, which will be loaded with opinion depending on which side of the argument you sit and probably where your pension fund is currently held. I am not going to get into this one as I think I have already said enough about pensions.
On Monday I wrote a piece "Missed Target - The Cost Of Failure". Well the price tag of this failure has now been released, with the FSCS drawing up a £58m hitlist. Whilst this is more akin to the shopping budget of some Premiership football teams, this is in fact the amount of money that the FSCS are now chasing from IFAs across the country that advised and arranged Keydata products. The lawyers for the FSCS (Herbert Smith) have taken the highly unusual and arguably unhelpful step of publishing the list, which will obviously not do the reputation of those firms any good. There are 437 firms listed, sharing the collective bill of £58m, nearly 100 of them have exposure of over £100,000 and I would be surprised if this didn't turn into a list of firms going into administration, which would be a very sad turn of events, 15 of the companies are being chased for more than £500,000 with Chase de Vere having a massive £8.5m (nearly 14% of the total).
This is not good. It is rarely good when a business fails, but for those that do, all that will happen is that the outstanding bill is passed to the remaining IFA firms - who are not even on the list because we didn't sell Keydata products. This increases operational costs considerably, reducing profitability and therefore sustainability. I'm sorry, but I just don't understand the wisdom of the system that eventually simply punishes good practice by default. There's also more to come of similar products (also rubbish) that it is reported has a list five times as long.
Sadly, the failure of Keydata is a failing at lots of levels, but above all, surely the structure of the industry is now very much shown for its failings. Research into products needs to be done not just by the IFA but also by the regulator and professional indemnity insurers and arguably industry journalists. If Enron taught us anything, it was to ask awkward questions when the supposed professionals (Arthur Andersen) were blinded by a story. Everyone knows that you shouldn't judge a book by its cover, but of course in today's culture it seems that this is harder to remember.
The link between those selling and buying Keydata products and the strikes today to my mind seems to be one of defying the sad, but real constraints of life, ultimately the price has to be paid. Any Government that takes a responsible approach to public finances, needs to research the commitments that it takes on. To do otherwise is like the IFAs that didn't look under the bonnet of Keydata. Caught in time means that the pain is less than it would have been, but it was always going to hurt because expectations were wrong. We have myths and fairytales to remind us of truths. Beans are not magic.
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