Fairinvestment.co.uk comments on the Equitable Life case and how this highlights the importance of seeking independent financial advice
Almost nine years ago, policyholders at Equitable Life saw the value of their savings and private pensions slashed by £4billlion and last week, Yvette Cooper, the Chief Secretary to the Treasury finally admitted that poor regulation was partly to blame for the group's failure.
She said that policyholders were victims of maladministration and should be compensated for their losses.
However, instead of compensating everyone who has lost out as a result of maladministration, Ms Cooper said that the Government's pay out scheme would only "focus on those who have been hardest hit."
Sharon Bratley, chartered financial planner at Fairinvestment.co.uk says the Government's response just isn't good enough.
"What exactly does the Government mean when it says that only those who have been “hardest hit” will be compensated?" she says.
"Is this somebody who has seen their total retirement fund of £10,000 implode and has no other private source of income in retirement or someone who has been able to invest £500,000 over their working lifetime?
"Both have suffered at the hand of a company where maladministration of investors’ capital was the norm.
"If the Government have found that policyholders have lost out due to the company’s poor management, then compensation should be applied across the board to everyone who has suffered, not just those the Government deem most 'worthy' ”.
Mrs Bratley says that the Equitable Life case reiterates the importance of impartial financial advice given that many Equitable Life customers were convinced by sales staff to put all their eggs in one basket, which is why many have lost everything.
"A large proportion of investors with Equitable Life had all their pensions
through that one company, providing little or no diversification, so when Equitable Life failed, so did these people’s future in retirement," explains Mrs Bratley.
"Equitable Life boasted that they didn’t pay commission to middle men but they had a massive direct sales force who were remunerated by commission.
"If you are honest, what would you prefer, work with an impartial adviser remunerated by commission or one tied to a single company?
"It just goes to show the importance of impartial advice when it comes to planning your finances; whether you decide that your adviser should be remunerated by fees paid directly by you or through commission payable by the insurance or investment company is of lesser importance.
"By dealing with an independent adviser, you will gain access to the whole of the market, meaning should a particular company fail only that part of your savings
will be in jeopardy."
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