Nm
Financial Services Regulation
It is claimed that regulation is needed because people take out policies irregularly and they are complex and because mistakes don't become clear till years later.
Promotion of coparative data would deal with one and two.
Compliance costs about 9% of industry turnover- goodness knows how much % of profit.
Whats needed according to Professor Simpson is "vigorous competition and effective enforcement of laws against fraud
Not that deregulation would necessarily be popular if people want barriers against competition
Important because : perhaps the most important decision households make
"The second reason why its important is that it represents a case study in the ineffectiveness of regulation"
No monopoly problems :Almost 200 companies authorised to conduct investment business., five largest companies are less than 30% of the market, less than most UK industries and less than insurance markets in most other EU countries
The third life directive means other European life insurance companies can do business withing the UK without needing to be authorised by the UK regulatory authority.
75% of all households have some form of long term investment contract
Collected over £43 billion and paid out more than £30 billion in 1994
Personal sector had £995 billion invested at end of 95
What actually happens
Every time you see a client you must fill in a document of at least 8 pages and possibly close to 15 of information about the client. Workng in an unregulated environment you would get most of what you need in 1. At lot of the other information is info the clients would often prefer not to divulge.
You need to get three separate quotes from three insurance companies for each bit of business and keep them in the file.
When you fill in the application form you also have to get the clients to sign a "terms of business" letter and produce a passport of similar for proof of identity , another 1 page from.
Then on return you have to write a usually 4 page letter to the client which must not be a form letter but unique to the client explaining what you've done , there are detailed rules for how this should be done.
When the clients policy arrives you must send a letter with that which the client is supposed to sign and send back to you.
You also must log in a paper file or computer record about 14 items of information about each client in a given order and manner.
In each clients file which must be in a certain order, there must also be a form kept with about 30 or 40 fields in which extra information is kept about the client
Ideally all conversations with clients are supposed to be written down and put in their file
A complete detailed record of all training attended or books read etc. must be kept.
Files must be kept for all circulars on compliance purposes.
Every three months or so and inspector comes round and goes through all this.
He also wants to know that you have a cashbook that you update daily, he wants to see the accounts you submit to the Revenue, he wants justifications of all your income items (provable), he wants your assets and liability statements to make sure you are solvent, he wants to see your date protection act licenses, your consumer credit license, your professional qualifications.
Some of them are nice people some not but they all need every detail correct.
If a client complains for any reason the matter goes immediately to the compliance department .
Advisers have been know to have problems with their licenses for the following reasons: one had to leave a network because he couldn't prove that less than £100 had come from the golf club since he was the secretary who had written the cheque (golf club had no problems whatsoever ), another cancelled a cheque to an introducer who was clearly trying to defraud him yet this was a compliance problem for him, many have been terminated for being unable to attend a compliance meeting or training meeting on a given day