Jeff Salway: Industry has to face up to the damage it has inflicted on itself

THERE remains a small but vociferous band within the financial services industry that refuses to accept that somehow, something went awry.

If they felt the industry still inspired trust and confidence in consumers, however, their rank has surely been reduced in recent weeks.

Of course, there are those that can hold their heads high. Their problem is that they have been tarred by the same brush applied to the banks blamed for the almighty mess we’re now in.

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One financial adviser has taken it into his own hands to confront the issues created by the financial services industry. Rather than defend or carp, Shane Mullins, of Fiscal Engineers, has started the Question of Trust campaign.

Launching next week, the aim is to get the industry talking about the damage it has inflicted on itself. It cites a study of leading chief executives which found that just one in four viewed the customer as key. The industry may have flexed its muscles when it comes to product innovation, but it hasn’t done so with the end user in mind. We need more innovation in service and more management in the interest of clients, rather than rewards and share options.

It’s all very simple, but the timing is good. Even after the mis-selling scandals of recent years, trust in the industry has surely never plumbed the depths of the present. When people within the industry recognise that – and Mullins has drummed up plenty of influential support – then there’s some small cause for optimism.

Every crisis has its opportunity. It wasn’t taken in the wake of the banking crisis, with far too little real reform aimed at addressing the deep-seated problems of an industry failing utterly to fulfil its remit and promise.

It’s not too late for the banking crisis and recent scandals to act as a catalyst to shaping a
financial services industry we can have some confidence in. The Question of Trust movement may prove yet another talking shop with precious few answers. But maybe we’re undergoing a change of mood as the backlash against the banks gathers pace. If it encourages the industry to look within and stop making excuses, the campaign will have been a success.

The Bank of England’s latest decision to embark on yet another round of quantitative easing (QE) is nothing short of reckless and irresponsible.

Evidence that QE has stimulated the economy remains thin on the ground. Yet the bank continues to pursue a policy that is having an appalling impact on pensioner finances.

That’s not over-egging it. By driving down gilt yields, QE has a devastating effect on the income available from annuities.

Consultants Barnett Waddingham estimate that a 65-year-old man with a pension pot of £100,000 will now receive at least £1,000 a year less on a new annuity than he would have done if he retired when QE started in March 2009.

QE also piles more pressure on company final salary costs, forcing those firms to devote more resources to plugging the gap and less to investing in jobs and growth.

The bank is like a toddler hammering the same button on a toy just to see what happens. But it’s playing hell with the
retirement prospects of millions who have already seen their pension savings eroded by the impact of the crisis.

While gaping tax loopholes remain open to those who can afford the necessary 
expertise, the revenue is stepping up its crackdown on
ordinary taxpayers.

Doctors, dentists plumbers, eBay sellers and homeworkers are among the groups to have been targeted by HM Revenue & Customs over the past two years.

This week it opened up another new front, targeting 40 and 50 per cent rate taxpayers who failed to submit self-assessment returns for the 2009/10 tax year or earlier.

Why this is being launched now is anyone’s guess. It may be HMRC’s tame response to recent controversies over tax avoidance schemes. It may be that it’s realised there’s easy takings on offer.

Not only will many targets be liable for a lot of tax, but many will have decided against filing a return because they were confident they were paying the right amount anyway.

They are at risk of hefty penalties even if they were paying the right amount, because it’s the actual disclosure that HMRC is concerned with.

The other problem is that by launching one campaign after another, HMRC is wasting both time and money. Even the Chartered Institute of Taxation is now urging the revenue to instead focus on a one-off national tax amnesty, rather than continue with a piecemeal approach yielding mixed results.

Either way, the message is that while the most affluent can keep taking the celebrity approach to tax avoidance – and the government’s proposed anti-avoidance measures will do little to restrict them – the rest of us are considered more valid targets.