The Financial Services Authority (FSA) will not be the prime target of the forthcoming review of retail savings, government troubleshooter Ron Sandler tells Insurance Times.
“My review is not whether the FSA is an effective regulator,” he says. “But where the regulatory regime impacts upon the areas of concern of my review, namely the effectiveness of the investment processes and whether the consumer is well served, we will look at how it impacts and draw conclusions from those findings.”
The scope of the review, by his own admission, is very broad, assessing the whole of the long-term investment market (this is where insurance fits in), how UK consumers are treated and how, in the future, they can be educated by the industry.
But the pressure is on Sandler to make a difference in the industry, after a catalogue of collapses and clear cases of mismanagement.
Barry Gardiner MP, who has raised the issue of the effectiveness of the UK's regulatory system and the competence of the FSA in Parliament, says: “After Independent and Equitable Life, the question must be asked why he does not think it is important enough to commission an external review of the FSA. Otherwise, it will retain its image of an old boys' club that keeps missing the boat.”
A number of City analysts express the same view. One asks: “Why doesn't the FSA review its procedures and act more like a rating agency? We talk to companies, their brokers and auditors regularly. We knew something was amiss at Independent months before the collapse. If his review does not investigate the FSA, then it has no teeth.”
But Sandler is adamant the review is worth undertaking. “I wouldn't do this if I thought it was a waste of time. There is enough evidence set out in my consultation document that a review into the long-term savings industry would be a valuable exercise,” he says.
“Before I took this on, I spent a long time discussing it with the Chancellor and others, to make sure what I was attempting was completely independent and that I was not warned off any particular area. I was given satisfactory assurances by the government that it would take the review seriously, to the extent that, if recommendations are made, they will be looked at carefully. Ultimately, it is up to the government to decide what action to take, but past experience shows reviews of this nature, if well conducted, do bring positive change. This will be one of those.”
He stresses he wants to approach the review “from an unbiased perspective” and that any views, “even if I hold them now”, will not be expressed in the public domain.
A key area for review is how channels of information to the consumer can be improved. The consultation document highlights that the internet is used by a “small group of well educated and active consumers”, making it a relatively restricted medium.
“We all want to see a world where consumers receive as much information as possible, in a form they can readily digest, which can assist them in making intelligent and informed decisions. Now whether or not the internet is one basis on which this can happen, we will find out when we do our work,” Sandler says.
His team of six has begun gathering information from the industry and hopes to deliver the results by the first half of next year.
Having steered Lloyd's of London through its reconstruction and renewal programme, Sandler is well aware that this review will be a political minefield, but he feels ready for the challenge.
“Lloyd's was an extremely intense and rewarding experience and I believe this review will be equally so, but in
different ways. Lloyd's was about finding a solution for some very considerable problems and very dire consequences for members of Lloyd's – this does not have the same sense of crisis,” he says.
A copy of the consultation paper can be obtained via the website: hm-treasury.gov.uk.