The European Life Settlement Association must be regretting it invited the FSA's head of investment policy to its conference.
Once they have recovered from the roasting Peter Smith has just given them Elsa members will no doubt be running to the airport to catch the plane to Zurich for the next stop in their bizarre whirlwind tour, regretting that they ever stepped up to the plate to promote their wares so publicly. The FSA is investigating all aspects of the market and this is clearly a prelude to a clampdown.
Smith's speech is worth a read in full because not only has he smashed the specific arguments in support of life settlements and traded life policies, he has also signalled the FSA's determination to root out bad practice in the entire retail investment market.
In exposing the ills of traded life sector so fully Smith has destroyed the lie used by some unscrupulous or complacent providers that because their products are aimed at 'sophisticated investors' they should be allowed to get away with lower standards.
Let's hope this spells an end to the concept of lower oversight for so-called 'experienced investor funds'. To my mind this has simply provided a loophole to get round natural regulatory safeguards.
But the brilliant thing about Smith's broadside is the plain Northern speaking with which he addresses the wider audience of providers and advisers.
To advisers he says:
'If you do not understand the product, you should not sell it. We have seen far too many market problems arising from advisers selling products they have not properly understood.'
On the higher commissions that TLP funds offer:
'It is a matter of great concern to us that we see commission rates being offered to advisers which are well out of line with market norms.
'I would ask the providers in the audience – if it’s such a good product, why do you need to pay people so much to sell it?
'I would ask the advisers in the audience – can you be certain that what you are recommending is in your client’s best interests, given the amount you stand to gain from the transaction?'
You can't get much plainer than that. Well done Peter Smith.