Has Carey put us in the right street?

I am not sure that many advisers had ever heard of Carey Pensions. But their case was very well known to those, like the Impartial Financial Advisers Association, who had taken an interest in the Berkeley Burke Administration case (BBA). Those over 2,000 of you who take time to read our blogs each week may well remember Berkeley Burke. 

Both the Berkeley Burke and the Carey Pensions cases are broadly the same. In each case, the complainant had a “Execution Only” relationship with an administration company that was forbidden by permissions to give advice. 

The Carey case was presented in 2018 and has taken 2 years to re-emerge from the High Court. In contrast, the Berkeley Burke case took one month to be declared. OK - one month to get the answer wrong may be too speedy but “Justice delayed is Justice denied”. Why was it necessary to take 2 years? 

The first denial of justice was to Carey Pensions when its directors were forced to sell the company to a rival. But, the other denials of justice are is much bigger and wider than the impact of this case on Carey's management.

For instance, had the Carey case been decided in 12 months or this time last year, the Berkeley Burke appeal would have either been unnecessary or properly funded. 

I was asked by BB’s directors to come into the case and inject some much-needed backbone into the proceedings. Remember this was primarily not my responsibility. I knew that it would hit the advisers’ FSCS but it wasn’t my dog in the fight.

As “Operation Backbone” commenced; it was clear from my involvement with BBA that the regulatory empire was extremely nervous of the BBA appeal. I suspect they felt they had won a home-town decision and they were anxious to protect it.

I know they applied all sorts of back door pressure to avoid the BB case coming to court. Clearly only a conspiracy theorist might suggest that regulators applied pressure to the court to delay but makes you think doesn’t it? 

Not that the empire needs to embark on such heavy-handed methods. It could depend, as always, on its best friend - apathy

There are 2 ways to run an association. Firstly, you have a totally subservient staff. This is called the “Secretary “model.

The Board, probably with the help of sub-committees, has great thoughts and the staff action them. In the early stages of the Industrial Revolution this may have worked but in this media savvy and political world it is a dead duck. This structure struggles to make a decision in a time frame that works. The "Secretary" model has mostly been abandoned because it also has another weakness.

There is no guarantee that the Board has any great thoughts. Indeed, it is my experience some members park any commercial nous they normally have in the cloakroom on the way in. Many times: I have had to say, “would you take that action in your business”? “No - so why are you lumbering your association with it”.

If you are a Board member of a representative body; it is extremely easy to take the course of least resistance. Doing nothing, rarely impacts on your time and non-executive Board members, quite rightly, aim to spend their time on their own businesses. 

This was the case for BB and the reason for “Operation Backbone”.

The SIPP operators had AMPS - Association of Member-Directed Pension Schemes. I had a couple of conference calls with them and must presume that they must only come out at night as they are clearly frightened of their own shadows. 

The other group impacted by the BB Case would have been networks. Who had collected under PIMFA banner. As always, no shortage of reasons for inaction from them.

The alternative structure ensures that the Board establishes basic policy. Then the Staff are released to create the strategy and tactics. 

This creates a challenge for the permanent staff. The officers are doing this job 24/7 and it is their job to know what it is coming down the line and what is possible. They should be experts in running voluntary organisations, media, and lobbying. In particular, they have to be leaders. If they are not leaders they are not worth their pay.

The issue for the BB case was that there was a total lack of leadership from the officers and that in turn is likely to lead to members engaging on private enmities or allowing tactical ideas fog the decision making. If a competitor goes bust is that a good or bad thing? It is too easy to decide that the firm under attack must be a “bad” form in some way.

So, the members took the line of least resistance and wallied their sector and the advisers with huge costs.
So, what are the lessons from this? 

Firstly, unlike the Wuhan virus, hiding at home won’t save you from infection. We have a regulatory system that is constantly seeking greater power. Unless there is push back, this will continue.

Secondly, every regulated firm is in the same boat. The SIPP operators may have got this cold but the advisers are paying their doctor’s bill. The company men are less sensitive as they do not own their firms but constant calls on the firm’s cash will compromise their livelihoods in the end.

Thirdly, avoid Uggr! How is yout Uggr    Backbones are not an optional extra.

Finally, you are going to pay. Get over it. You only have one choice – Who?

SIPP operators in a £2.4bn sector were asked to guarantee of £300,000. They only needed to pay if the Appeal failed. 

They could have invested £1 to avoid £527. It was attractive then. The Carey case has made that deal extremely attractive now. But the opportunity has gone and isn’t coming back.

So, for a peanuts investment they abandoned the battlefield in exchange for a quiet life and a FSCS bill of £158m. Thanks guys! But are advisers any better?

As I said you are going to pay. The only question is - Who?

The IFA Sector enjoys over £4,000,000,000 income. Advisers contribute no more than £800,000 to trade associations. Less than £1 in £5.000.

Advisers fund the regulators at 10% or more. That’s £1 in £10 with a compound regulatory inflation rate of 6% pa. The numbers speak for themselves. You don’t even need to take your socks off to count.

If 10% of those who regularly read our Blogs joined IFAA:  We would be able to employ 2 more staff and take on far more issues.  The issues we miss -  cost advisers time and money.

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