financialpost.org – financial news

PENSIONS MIS-SELLING

How much sales commission is reasonable? This was a fundamental question during the pensions mis-selling scandal. Worse: are the best and most suitable investment products being sold?
There has been a really damaging fall-out from the case in the UK of mis-selling pensions. About 1.1 million people were wrongly advised to transfer out of their company pension schemes. The compensation given to the victims is estimated at £12 billion so far, but this may only be a portion of the damage done. Many individuals and groups have been sold unsuitable pension products that should not have been promoted to them in the first place. There is a real need to protect the investor against the failures of a completely free market.
Who is there to protect the investor? Even the most sophisticated investor requires the assistance of experts. Financial operations need specialist support staff who assist them. Who are these specialists?
Lawyers – due diligence.
Accountants/auditors – examine the balance sheet and account statements.
Bankers provide the finance.
These are part of the old way, those who carry out investment risk management by the orthodox school of risk management.
But does it really fit the 21st century? Even with the “best” experts from the investment banks, lawyers and accountants behind you, you can still snatch failure from the jaws of success.
Given the IPOs and dot-com scandals, the lumbering tiger of corporate governance is only just starting to growl and get its claws out. It can only be a good sign in the long run for the innocent investor.