William Kay: Snipers target FSA for being so wrong so often

Callum McCarthy and John Tiner, respectively the new chairman and chief executive of the Financial Services Authority, can be forgiven for searching the eBay web site for offers of Army surplus tin helmets. Barely a day has gone by this week without some sniper taking aim at the FSA.

Angela Knight, the former Tory Treasury minister and now head of APCIMS, the trade body for private-client stockbrokers, was first up, pointing out that new rules to make brokers itemise their charges instead of "bundling" them would unintentionally make share-dealing dearer for the small investor.

The Investment Management Association, wheeling out its guns on behalf of the big fund management groups, followed that with the claim that unbundling would cost £100m and the consequences would be unknown. Better, the IMA's director general, Dick Saunders, said to increase transparency.

Then Bestinvest, the financial adviser, published research which casts grave doubts on the FSA's plans to "depolarise", letting banks and insurers sell others' products. In the year to end-August, tied advisers, the sort banks employ, sold three times as many fixed-interest funds as IFAs did, or as direct investors bought, at a time when buying equities was the right advice.

Bestinvest's Justin Modray said: "I am sure that after stock market past-performance figures look attractive again, tied agents will revert to selling equity funds in droves to the same customers who will have missed out on that stock-market growth due to being overweight in corporate bonds. These figures suggest tied advisers prefer an 'easy sell' to fill their coffers."

The FSA's analysis of depolarisation assumed the change would have no impact on quality. The Bestinvest research suggests otherwise.

Anna Bradley, the FSA's consumer director, seems to think the answer to endowment mis-selling is to leaflet GPs' surgeries. But, as Paul Gosling reports on page one, that is little consolation to those unfortunates who were talked into buying hopelessly optimistic low-cost endowments before the regulations were tightened in 1988. A lot of those policies were sold by banks' tied agents.

And my comment last week on new FSA rules for split-capital investment trusts was made meaningless, by the FSA leaving out the word "no" in its statement. These trusts will be limited to putting no more than 15 per cent of their money into other trusts.

* Andrew Nagele, who manages Legal & General's top-performing Japanese fund, said this week: "Although it is too early to say we are entering a bull market (in Japan), the picture is certainly now looking brighter for Japanese equity investment."

Mr Nagele in February last year: "For the first time in more than 10 years, it may be possible to begin discussion of when Japan might be a more attractive investment than the US."

Like the stopped clock that is right twice a day, perhaps Mr Nagele is hoping that eventually he will be proved right. Better to wait for solid progress in a market that is so difficult to read.

* The arrogance of financial service providers never fails to astonish. After the complacency which led to Lloyds TSB's recent £1.9m fine for failing to train its staff to sell responsibly, Marks & Spencer has been slapped down for trying to flout the law.

The Consumer Credit Act clearly states companies are not allowed to send credit cards to people unless they have asked for them. M&S thought it could save a fortune by simply blanket-blitzing its charge card customers with the new &more credit card, doubtless believing it was doing them a good turn.

But, as M&S has been in the finance game long enough to have known, a charge card valid only in its own stores is a very different proposition from a fully-fledged credit card accepted everywhere.

The potential for falling into unmanageable levels of debt is far greater, not least because M&S Money will be under pressure to raise credit limits to the highest it reasonably can.

Many commentators, including The Independent, pointed out to M&S that it was breaking the law but such advice was brusquely brushed aside. The company's head office culture is that M&S knows best, and lesser mortals had better know their place. The credit card setback is a long overdue reality check.

w.kay@independent.co.uk

William Kay is Personal Finance Editor of 'The Independent'