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10/28/2006: "Connections: regulation, the cost of advice, 'soft-compulsion' pensions and posturing at the despatch box"

Thursday's despatch box spat between Brown and Osborne (the 'effing' word, thrown papers) was prompted by John Redwood daring to suggest (as part of his deregulation thought-leading role in the Conservative Party) that financial services consumers might be better off with lighter regulation or even an opt-out for riskier products. The Chancellor's reposte was typical despatch box posturing: the Tories plan to abolish all consumer protection on pensions, mortgages, insurance and credit cards.

Grow up, boys. Four items posted in the last two months focus on the serious problem in the business of cost-effective advice. The head of the FSA tells the industry its economic model for the distribution of long-term savings product is broke. The head of the ABI nonetheless insists that competition between providers for consumers' choice will be just as low cost a way to go for the new National Pensions Savings Scheme as centralised, non-branded collection and public tender behind the scenes for the fund management. The industry just does not get the connection between the costs of competitive choice and 'active management' - a key message from our analysis of one of the top performing UK unit trusts. And 'Lambda' model builders Chris and Stuart propose a solution that recognises that a separate advice market is an unaffordable luxury.