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The words “US $700 bail-out is rejected” were not the ones I thought I’d be writing today and I doubt I’m alone in that thought.

The Bush administration’s billion dollar plan to save the global financial system has failed, despite wide-spread expectation that it would get the go-ahead.

Newspapers and news stations have gone wild describing the traumas hitting the US as a ‘Wall Street meltdown’, the ‘Blackest Monday’ and comparing the situation with the Great Depression.

Investor anxiety is not going away and as a result stock markets are rising and falling, leaving banks with thousands of pounds wiped off their value.

But it just goes to show, it doesn’t matter how much trouble the financial system seems to get itself in, people are increasingly unhappy about the way governments are spending taxpayers money.

The protestors who took to Wall Street over the weekend wearing t-shirts that read: “Bail out people not the banks” are confirmation of this discontent.

The people of the US don’t want $700bn of their money being squandered on greedy bankers and why would they? Why should ordinary people have to foot the bill?

I know that over the past few months, many of you working in the financial services industry have argued that if individuals can’t pay their mortgage at the end of the day that’s their fault and they should be accountable for their actions.

So why then should banking institutions be treated any differently?

If there is no bail-out, global financial markets will cope.

Without one, there will definitely be more losses but this does not mean that the world will come to an end. The market would in time correct itself – it would have to.

But jumping back into the real world, it is highly unlikely that Bush will let his rescue plan fall by the wayside and is, I’m sure, already be working on plan B.

In fact, rumour has it that a second attempt to prevent the world from further meltdown is expected at the end of this week.

So with no nanny state rescue plan agreed, we can probably expect more unfavourable economic, banking and company news.

But who’s to say that if a rescue plan does go ahead it will stop the world from landing head first in recession?

The only guarantee it seems, is that there are no guarantees.

Twenty years minus one day from Margaret Thatcher’s famous Europe speech in Brugges, and 15 kilometres down the road in Ghent, I found myself just over a week ago giving a speech to help Flanders celebrate 25 years of innovation.

She warned of a lack of accountability that was inherent in the European political project, and importantly, she was fighting for Europe to be strong by keeping the unit of accountability as close to the person or country as possible.

Everyone on the 10 person panel after my speech ate from the public trough of funds, and yet intriguingly agreed with my speech’s thesis that Europe is feudal.

People have voted in a system whereby the implicit deal is that they subordinate themselves to a master who promises to take care of them. It’s no longer the monarchy, but a large, unaccountable state. Big government creates dependency and weakens the individual spirit.

Proof positive of my thesis: the accounts of the EU have gone without an auditor’s sign-off for more than a decade, and there is no uproar.

We have the richest poor people of the world in the UK and Europe. Isn’t that good or enough?

We see everywhere the building of a society for the lowest common denominator. Even the Football Association announced that it would remove “winning” from matches for seven and eight year olds. No results will be collected. Whether you win or lose won’t matter. And you can be sure that if you can’t win, fewer will train for victory.

Today we try to engineer fairness everywhere, and yet one of the assumptions of capitalism is that there are winners and losers. The market failure that was Lehmans was allowed to happen bringing down innocent employees with it.

But isn’t that ruthless, not to care about society?

Successful entrepreneurs tend to care about the outcomes in society. Case in point: Paul Barry-Walsh. He founded SafetyNet which he sold to Guardian IT making a fortune.

What he did next, however, was to give people who had fallen by the wayside a chance to get back up on the road. Barry-Walsh set up the Fredericks Foundation, the leading micro-finance organisation in the UK, which makes micro-loans to hundreds of ex-convicts and recovering drug addicts.

So what we should really care about as a society is how to create more Michaelangelos, or Rebecca Adlingtons, or Charles Dunstones.

It’s a tough call. The world is going to hell it seems, and yet, we have to decide what kind of society we want to have – where greatness is encouraged, accountability enforced, or where medicracy rages. And the rules of engagement that we embrace now as many panic, will shape our future for the next cycle.

I know which future I’m up for.

Julie Meyer is chief executive of Ariadne Capital

In recent Hollywood comedy “About Schmidt,” Jack Nicholson plays a newly-retired, newly-widowed insurance company employee with a medium-sized home in Omaha, Nebraska who, as old age begins to bite, decides to donate some of his takings to charity.

Any resemblance to Warren Buffett, a newly-widowed insurance company employee with a medium-sized home in Omaha, Nebraska who, as old age begins to bite, decides to donate some of his takings to the Bill Gates Foundation, is, of course, pure coincidence.

The difference between Mr Schmidt and Mr Buffett is that whereas Mr Schmidt dreamed of being the owner of a listed company on the cover of such magazines as Fortune or Forbes, Mr Buffett has achieved this and become a multi-billionaire in the process.

Whereas Mr Schmidt spent his life designing statistical models, Mr Buffett has spent his career acting on them, buying into easily identifiable princes at toad-like prices, as he has famously phrased it.

Now Mr Buffett has hit the headlines again, buying $5bn of Goldman Sachs stock at a mind-bogglingly cheap price and vindicating his statement that derivatives can indeed be weapons of mass destruction. For Mr Buffett, even at times of crisis, buying cheap businesses with long-term pricing power always seems to win over multi-asset opportunities and frantic hedging.

Hats off Warren – unless the entire US insurance industry is nationalised, we will have to struggle not to quote your common-sense wisdoms too often.

If ever there was a time to roll up your sleeves and start growing your own vegetables, this is it.

The idea of digging for my dinner has never seemed so attractive, with only the fact that I live in the inner city, in a flat without a garden, to stop me.

But the effect inflation is having on the price of supermarket food is not really the biggest issue at the moment.

The delayed $700bn bail-out for the US financial system and the impact this is having on global markets, on the other hand is.

An unprecedented White House emergency meeting held last night to discuss Bush’s financial rescue package ended without agreement.

The Bush administration is looking for $700bn to allow it to buy bad debts from American banks in a bid to bolster the global economy.

Bush had hoped that a deal would be bashed out by today, however Republican members of Congress remain sceptical about the proposal and the deadline for a package to be agreed has now been pushed back to Monday (28 September).

This in itself is making investors nervous, and activity in stock markets has this week remained subdued.

However the longer the deal is delayed, the more anxious investors will get. It is now looking highly likely that stock markets will nose dive next week as a result, and who knows what the consequences of that will be.

In a bid to instil calm, the Bank of England and other Central Banks this morning announced another co-ordinated move to pump billions of pounds into overnight markets.

But regardless of this action, there’s no getting away from the fact that another eventful week is in store.

What next week will bring depends largely on what happens in the US, and one can only wait and watch.

When you buy a product or service you are often buying an experience as well as something that provides a practical benefit.

With a train ticket for example you are buying the transportation from A to B, hopefully something comfortable to sit on, and staff who are friendly and helpful. However, many experiences are ruined when aspects of the service fall down.

I have noticed how many companies and services in the UK have very prominent notices saying: “Our staff deserve to be able to do their jobs without being abused by customers”.

While I agree wholeheartedly that no company employee should ever be verbally or physically abused by anyone, I do increasingly think that this sentiment is used as an excuse by many companies to offer the most appalling levels of service.

On a recent journey into work, about 500 passengers had to endure mass overcrowding on board following a train cancellation. The passengers were forced to queue for ages at the exit barrier to buy a ticket from staff, as they hadn’t been able to buy one on board, before they could escape from the concourse.

One lady quite politely complained to a barrier inspector that not only was she an hour late due to the cancelled train, but she was now being inconvenienced further by the wait. She didn’t raise her voice. She wasn’t unreasonable. But the representative told her that “I don’t have to listen to your complaint – my Union protects me from that and they will sue you for abusing me.” The lady, and a great many of the people queuing with her, were horrified by this attitude.

Buying a protection product is also as much about customer experience as about the policy document that promises to pay a large sum of money on diagnosis of a critical illness.

The experience starts with the adviser and the factfind; includes the accompanying product literature and the clarity of the words you read; encompasses the service you receive during the underwriting process and the responses you receive to future requests and, ultimately, how your claim is handled at what could be a physically and emotionally difficult time in your life.

If any one of these touch points fails to deliver an excellent experience, people are likely to feel that the company and its products are not providing good value or meeting their needs.

The experience surrounding the product is so important. Thinking about the lady being treated so badly by the railway employee really makes me wonder how many customers we in the protection industry lose every year as a result of similar experience breakdowns?

But with protection it is more than that. There’s an important difference to take into account here. Most people don’t have to be convinced to go on a train, plane or to the cinema – it’s something that most of us like to do. With protection it’s likely that the customer has had to be sold the product, it may even be a grudge purchase, and one they feel that they don’t really need.

So, having got them as far as making the decision to purchase protection, it is doubly unacceptable to deliver a poor experience. It could well result in them taking no protection cover at all!

In the protection industry and in the UK in general, I would prefer to see signs in buildings saying: “Our customers deserve to be given excellent service at all times.” Ticket barrier inspectors take note please!

Roger Edwards is proposition director at Bright Grey

Saving for a rainy day is a saying that many of us have yet to action.

Being encouraged to sign up with a work pension or private scheme from the moment we pen a suitable career option on the CV, is one we are all familiar with.

Put simply, paying into a pension pot over the duration of long-term time equals receiving pension payment upon retirement. Easy peasy. Or so you would think.

But not in the case of my mum. Having worked full-time for a staggering 45 years, she has paid her dues every month into an employment pension pot, before retiring three months ago.

But has she received any payment for contributing to the face of the government’s National Health Service?

Not a bean. Zilch. Nada. Three months later, she is still having to fill out numerous paper work, chase various people with infinite phone calls and is currently having to wait for the postman to deliver any form of correspondence.

At this rate, it is more like pigeon delivery.

Despite the Pensions Bill draft legislative programme this year – which aimed to rejuvenate the May 2006 White Paper in an attempt to head off a potential pensions crisis and clear up the red tape over pensions – it seems that Labour’s system is still failing many.

To add, recent official figures from the Office of National Statistics (ONS) has revealed that only half as many private sector workers are in line to receive a “gold-plated” pension as those in the public sector.

Chris Grayling, Shadow Work and Pensions Secretary, said this month: “The steady unravelling of our pension system under Tony Blair and now Gordon Brown just goes on and on.

“The pensions divide between the public and private sector seems to get wider and wider – and more and more businesses are struggling to keep their pension schemes afloat.”

But a government spokesman insisted that: “As a result of reforms in the current Pensions Bill, millions of people will be automatically enrolled into workplace pensions.

“For the first time workers will have a right to a contribution from their employer to boost their retirement savings.”

All very well. But how does this help those waiting for their pension packet like Mrs Garduce who has paid up and is still waiting for some sort of clarity though?

Will there be an end to such debacles, with a clearer and more defined way that pensions work for the better?

The two words that normally follow pensions is far from being removed – crisis and divide.

In this instance, it is very hard to see why one should ’save for a rainy day’.

It may seem like a lifetime ago but it was only a couple of years ago that some lenders were desperate to speak to those who could bring them more mortgage assets.

Back then funds were far more easily obtainable from investment houses keen to tell their investors their cash was as safe as houses. Some banks were struggling to find enough borrowers to hand this money over to and reap rewards for investment houses.

What a difference a year makes, eh? Earlier today Bradford & Bingley, the latest lender to endure whispers about a potential takeover, confirmed is had renegotiated the terms of its mortgage forward sale agreement with GMAC-RFC.

Under the original terms of the agreement, signed in December 2006, the company agreed to purchase a minimum of £350m of UK mortgage assets from GMAC-RFC a quarter, with £1.75bn remaining to be purchased before the end of 2009.

However both businesses agreed to revise the terms of this agreement to £500m of loans for the final quarter of 2008 and between £225m and £250m in the first three months of 2009, after which the agreement will cease.

GMAC-RFC will receive in lieu the equivalent of the premium that would have been paid should the agreement have run the full term, according to a statement that was made to the City.

This move came after Bradford & Bingley’s interim results revealed arrears on its organic loans were considerably less than the level of arrears on acquired loans.

Mortgages three months or more in arrears in the organic mortgage book rose to 1.78 per cent compared with 5.11 per cent for those that had been acquired.

This latest announcement by Bradford & Bingley reflects the fast changing fortunes of the mortgage asset origination companies.

I am sure, when the market springs back there will once again be significant demand for mortgage asset originators again. But will the conversations that take place be the same as those of 2006?

As a side note, in its interim results at the end of August Bradford & Bingley announced it had extended its contract with Kensington by 25 months and the value increased by £132m.

It appears that the FSA might finally be cracking down on banks paying over inflated bonuses that encourage excessive risk-taking.

As Lord Adair Turner told the BBC last night, the regulator is considering penalising banks that pay large bonuses if they cannot adequately explain their pay structures.

Lord Turner said: “What we are now doing is saying to banks, explain to us what your structure of bonuses are. If we think they are in danger of encouraging people through that bonus structure to take risky actions which appear to look good at the time, but which create toxic assets for the future, then we have the power to say if you want to do that, you’ve got to hold a bit more capital because we think you’re a more risky institution.”

It is about time the FSA started to take a proactive approach to such a fraught issue.

But as one adviser I spoke to this morning pointed out, isn’t this slightly contradictory to the FSA’s own actions?

After all, weren’t five of the FSA’s own bosses the recipients of five-figure performance-related bonuses earlier this year, despite the regulator’s acknowledged failures over the handling of Northern Rock?

And let us not forget these payouts included £30,000 to former retail markets managing director Clive Briault, despite him stepping down from his position following the Northern Rock crisis.

As an adviser friend of mine (who asked to remain anonymous for fear of what the regulator’s next visit might bring otherwise) questioned, what is the FSA’s own justification for paying out such mammoth windfalls just months after said crisis?

I think the answer has something to do with a pot and a kettle.

What do you think?

Warren Buffett said he would “rather earn a lumpy 15 per cent over time than a smooth 12 per cent”. This casts doubt over of the most basic assumptions of investing: that volatility is to be avoided.

Of course, not everyone would agree with Mr Buffett. Mrs Smith, who depends on returns for her monthly income, would prefer a smooth 12 per cent. Working out whether a client is a Mr Buffett or a Mrs Smith – so-called risk profiling – is, needless the say, the core of the IFA profession.

So far, so logical, and everyone is happy. The problems start when returns no longer match the risk profile – when the 12 per cent develops lumps on the one hand, or the 15 per cent flows in with suspicious regularity on the other.

Over the sunny days of 2003-07, investors got used to a smooth 15 per cent. The inevitable result was that daredevil bankers geared themselves up to a lumpy 20 per cent. In a world of falling volatility, this was logical. But in a world of concealed volatility, it was not.

As we now know, risk was masked by credit and financial engineering. The lumps at 20 per cent proved indigestible after all, and the system is still coughing them back up.

Which leaves Mrs Smith struggling to find a smooth 7 per cent, let alone 12. If volatility is back, as the central bankers keep on saying, advisers may have to readjust their risk-profiling methods. If only the stock markets respected TCF…

The Retail Distribution Review (RDR) presents us with an exciting opportunity to develop financial services in the UK.

One of its fundamental objectives is to ensure that customers have wider access to financial services. This should bring significant benefits to both consumers and the industry.

IFAs provide an important and very valuable service by offering customers quality and choice. Other customers have their financial needs met through advisory firms currently described as multi-tie, single-tie and specialist.

It is not necessary or appropriate to restrict the provision of advice to IFAs. What is important is that customers understand the distinction between the types of service they are getting:

Advice – customers get advice on their financial needs and solutions, with the adviser responsible for the advice;

Sales – although may be guided by an adviser, the customer is responsible for buying or not, and;

Money Guidance – customers only provided with information and guidance but no purchase is made.

Clarity for the customer is essential and adviser status should be clear. Clients should be aware when the adviser is working as their agent or the agent of the company the adviser works for.

The move to higher competence and professionalism will help to improve customer confidence in the industry. However, it is important to recognise that qualifications are only part of the solution; experience, professionalism and treating customers fairly all have a significant part to play.

The introduction of Customer Agreed Remuneration (CAR) will also help to increase customers’ trust in the industry by stopping providers playing any part in how advisers are paid, helping to remove any perception of bias.

Where a single provider is involved, clearly disclosing and agreeing remuneration and services with the customer before the product is sold will provide the clarity required.

By working together, we can help to ensure that the post-RDR era is successful for providers, advisers and customers alike.

Simon Clamp is UK managing director at Friends Provident

No, this not about the BBC TV programme ‘Last of the summer wine’, the world’s longest running sitcom, featuring the three principal characters of Compo (the poor one), Clegg (the irritating one), and Foggy (the slightly confused one).

It is, in fact, more on the lines of a farce, featuring compo (AKA paltry compensation paid to policyholders by some providers for using Lautro charges), cleg (another name for the blood sucking horsefly, AKA the insurance companies refusing to pay compensation for using Lautro charges), and foggy (AKA the opaque situation regarding IFAs’ rights to rebates where they have overpaid compensation due to life office actions).

Although there are clear cut rules surrounding compensation to clients mis sold endowment mortgages, there is no clear cut rule about any recompense for advisers who are only now discovering that they overpaid compensation to clients due to the use of too low a surrender value calculated by life offices using Lautro charges.

Two advisers have separately forwarded copies of letters that were sent out by Clerical Medical to policyholders early in September in respect of its annual review of endowment mortgages, in this case its unit linked endowments.

The letter states that the office is aware that it used lower charges than those which would actually apply and that “for any given growth rate, the actual maturity values will be lower than those illustrated, even if the growth rate is actually achieved”.

The letter goes on to say that Clerical Medical is “not required by our regulators to take any action”, but it nevertheless has increased the unit allocation by 26% to 129.5% pa in the first case and by 29.6% to 133% in the second case, to compensate for the differences in charges.

But this isn’t as good as it first appears. Increasing the unit allocation is compensation by drip feed, so the full benefit won’t be felt until maturity. Surrendering the policy early will result in a loss of the full compensation for the policyholder and a considerable saving for the provider; it would be far better from the policyholder’s and adviser’s point to add a cash sum to the policy to compensate for the loss, but much more costly for the provider .

Adding a cash sum would also mean that compensation levels would be directly lowered, because it is calculated by comparing the policy surrender value at the time of claim with the position the client would have been in had they had a repayment mortgage.

If surrender values are calculated with an increased allocation, they would obviously be lower. In a worst case scenario the effect of this could be to push a profit into a loss, and result in a green letter becoming amber or even red. This, in turn, could lead to policyholders panicking and cancelling their plans, receiving only the (low) surrender value in the process, thereby inflating the loss, which would result in over payment of compensation by an adviser for a mis-sale.

I reported that Clerical Medical had begun making reparations to policyholders in 1999 for its use of Lautro charges, in my article in the September 2007 issue, and that such redress would cost the company £20m. But IFAs are not entitled to receive a single penny for over-payment of compensation, caused by the life office.

So if Clerical Medical is doing the decent thing and recompensing policyholders, it and other offices in the same boat should have the decency to do the same for IFAs too.

After all, IFAs have no choice in how they calculate the compensation due, whereas the life offices currently not only have a choice of whether or not to pay compensation to clients for using Lautro charges, but also in how they go about doing it.

The FSA’s enforcement team have, with varying degrees of success, been used to imposing fines and public censures on companies.

Some of these fines have been large and some have led to changes in behaviour (for example changes in advertisements following a spate of fines in 2005). The problem however, which the FSA acknowledges, is that their action has not always deterred potential future offenders.

Firms are able to rely on their insurers to meet the cost of dealing with an investigation and can easily reshuffle their employees when the FSA makes an adverse finding. In addition, the FSA’s early settlement initiative has led some firms to settle early for a reduced fine, with less analysis being carried out by the FSA about who was actually responsible for what.

However, in 2008 things have started to change. The FSA has started to focus on the role that individuals are playing at firms. And this, potentially, has real consequences.

Senior management at firms which deal with retail clients are being required to show that they, rather than just their compliance staff, are embracing the FSA’s Treating Customers Fairly (TCF) requirements.

In addition, Skilled Persons Reports, in respect of firms which are close to enforcement action are being required to focus more on the responsibilities and attributes of senior management.

Most significantly, the enforcement team has made it clear that in the context of market abuse and insider dealing they are prepared to take criminal action rather than simply settling their case at an early stage for a reduced fine and an agreed statement to the media.

So far this year three criminal prosecutions for insider dealing have been launched. This is by no means an easy proposition for the FSA with the prospect of jury trials, cases taking even longer than the FSA’s internal regulatory process and the hearing being in public.

In addition, over the last year the FSA has prohibited a higher number of individuals from acting as FSA-approved persons than in the past. Individuals faced with a prohibition will, quite rightly, want to fight the decision.

It is understandable that the FSA is altering its approach. The big question is whether increased criminal cases and public prohibitions will actually scare individuals sufficiently to make them change their behaviour?

The reality is that many individuals who become subject to an FSA investigation were never actually aware of the FSA’s powers or past decisions. Many of them were poorly advised, in businesses which have grown quickly without their compliance teams growing at the some rate, or entered into reckless and greedy trades without pausing to think.

The challenge for the FSA is not just winning difficult cases but also publicising key messages so that the right individuals listen.

Tim Dolan is a partner at Pinsent Masons and is a former member of the FSA’s enforcement division.

At the risk of having you all boo your computer screens, I wish to tell you a story about my friend Dave who is a City trader at a major investment bank. Now Dave is a lovely bloke but, bless him, he has had a bit of a fright this week.

His fun job as, basically, a professional gambler has stopped being full of high jinks and has instead turned into something more akin to “Planet of the Apes”.

No more boozy breakfasts for him and all-expenses paid lunches. Mornings are now spent beating off his manager with a Mont Blanc pen who is desperately trying to persuade him to take early redundancy.

Add to this the atmosphere of paranoia, sobbing female colleagues and a total block on mobiles and BlackBerrys in the office, and you can sort of see why he has developed a twitch.

People sit at their desk with their heads in their hands as for the fiftieth time that day they try and ascertain exactly how many deals were syndicated and underwritten by Lehmans. Other people keep “nipping out for coffees” but really everyone knows they are doing what traders do best, namely hedging their bets and getting in touch with their Headhunters.

And yes. The banks have brought it on themselves. They have gambled and misspent and overspent and siphoned off funds and acted akin to Del Boy in an Armani suit yet the finger of blame can not just be pointed at top management. The dodgy deals completed further down the chain were done by people who, to be quite frank, were young, inexperienced and thought they knew it all.

Let’s be frank, a lot of the people playing around with your money in the City are young blokes with more testosterone floating round their bodies than a rugby team on tour. Banks have poured huge resources into graduate recruitment and, even when jobs are cut, it’s middle management which takes the first hit. Not the top brass or the relatively cheap newbies who, to be perfectly honest, are imbued with what I like to think of as “the son of God” complex.

But are the latter totally to blame? They are young blokes with huge sums of money being thrown at them and they must think all their Christmases have come at once. One minute they are another spotty youth at university, the next they are Billy Big Balls with more money than they can shake a Rolex at.

Add to this unflinching self confidence that they are on a “fast track” scheme, meaning they never really develop any in-depth knowledge or experience and you have a perfect recipe for, what one would refer to in colloquial parlance as, el dog’s dinner.

All they register is the big bonuses and their rather snazzy suits from Hugo Boss. Up till now, these blokes have never known a downturn and their bosses certainly didn’t hold them back as these young bucks strutted around like Naomi Campbell on a catwalk. You see similar things with young footballers who go on the rampage and you certainly wouldn’t let them loose on a trading floor.

So back to my mate Dave. This bloke has been playing around with over £100m for the past year and he’s a nice bloke but let’s be frank. The last thing he was given to look after, it died.

So while I wouldn’t leave Fluffy the cat with him the banking sector seems happy to leave a small country’s GDP in his hands. Which means that someone somewhere has some explaining to do.

“Hellifax” shouted the front page of the Daily Mirror. Steady there. Plummeting share prices may be bad but fire, brimstone and the eternal damnation of hell this is not. It would probably be more accurate to say “Paradise lost.”

During the run on Northern Rock a year ago there was still hope the trauma that is now impacting the banking sector could be contained.

Today there is a palpable sense of fear in the market and I must say it has not been helped by some of the headlines of the last few days that suggest we have entered a world akin to a Hammer House of Horror film.

My favourite one about Lehman Brothers’ demise was the Evening Standards’ “Lehman Brothers is allowed to die.” Images of the Texas Chainsaw Massacre sprang to mind…

Otmar Issing, the former chief economist of the European Central Bank, told The Daily Telegraph that confidence in the world’s financial system was draining away, leaving authorities facing the gravest challenge in living memory.

He said this was the most serious crisis since 1929.

Is it just me or is that insulting to those who not only lost the shirt off their back but who lost their lives during the Great Depression?

In 1929, traders leapt from the top of New York skyscrapers. At the moment, we have had photographs of saddened bankers leaving Lehman Brothers and pensioners queuing up for their cash outside branches of Northern Rock.

Do not get me wrong – I promise you I have not got my head in the sand. Things are bad. But what I, and I think everybody else, want to know is just how bad can it get before it starts to get better?

Angela Knight, chief executive of the British Bankers’ Association, said: “A year on I believe we will be looking at a much improved position.”

What do you think it will take to make guarantee September 2009 is a vast improvement on this month in 2008?

Last night at around 6.30pm I was standing outside the tube station at Canary Wharf, waiting for a friend.

She was late but I wasn’t bothered because it gave me a chance to take a step back and take in what had happened right there just a few hours before.

The day had been a rather normal Monday for me, I got up, scuffed at the fact that the weekend had gone so quickly, then came to work and did what I had to do.

Sadly, the same cannot be said for the thousands of Lehman Brothers staff across the world.

On Sunday, the firm had filed for Chapter 11 in the US, declaring itself in a state of bankruptcy.

On Monday, just like me and most of you, Lehman Brothers staff in the UK also went to work but found there was actually no work to do because the company had simply run out of money.

As I waited for my friend I glanced around me.

The bars were packed and so were the streets (nothing different there) but there was also a large presence of security guards and a couple of police cars.

The guy stood closest to me was on his mobile saying how the situation was “really depressing”.

He told the person on the other end of the line that earlier that morning he was just sitting in the office doing nothing and didn’t have a clue what was happening apart from what he had heard in the news.

Apparently his emails had been cut off without warning and without any communication from management as to what was happening with the business. Later on, he said his manager came into the office to tell staff to go home.

Also stood outside the station were a pair of ladies, who were just staring up at the Lehman Brothers building like it was about to disappear from the sky.

Rather more upsetting were three men who looked like they were wearing security guards uniforms under their jackets who, as they walked past those drinking outside the bars, provokingly shouted: “We’ve got jobs, ha ha, lets have it.”

My view on the situation is the same as Tony Lomas, a partner at Price Waterhouse Coopers, which has been brought in to administrate Lehman Brothers.

“It seems amazing that a business as huge as this can fail in this way.”

Speaking to journalists outside the Lehman Brothers building in Canary Wharf yesterday afternoon he said: “There are members of staff for whom it is quite clear their jobs are finished. Some staff will have taken their private stuff home because they won’t be needed in the future.”

It is indeed a slap in the face to come to work and find out you no longer have a job, but for Lehman Brothers staff it doesn’t end there because there is no certainty they will receive the wages they are owed.

Ucits, pronounced “you-sits”, is not a sexy-sounding brand. Ucits IV – sadly reminiscent of flagging movie franchises, despite that ennobling Roman numeral – is less compelling still.

Standing for Undertakings for Collective Investments in Transferable Securities, Ucits is somewhat different from the other ugly acronyms of the asset management business, Oeic and Sicav.

It represents not just a legal structure for collective investment, but a 20-year-old project for European integration and modernisation.

But because the Ucits III directive expanded the range of financial instruments an Oeic could contain, it is often confused with a fund-type.

Sales directors will talk about a “new Ucits III fund” for example, when they mean an Oeic that takes advantage of all the fancy hedging tools available under Ucits III regulation.

Ucits IV, meanwhile, has little to do with financial instruments. Instead, it focuses on breaking down the trade barriers between the various member states of the European Union, paving the way for a single market for mutual funds.

Under Ucits IV, fund houses would be able to pool funds and market them more freely through the different member states. This would, theoretically, lead to significant cost reductions for the industry and consumer.

Because cost reductions mean job losses, however, the new directive has proved controversial with the offshore tax havens Ireland and Luxembourg, which fear companies will simply register funds in their jurisdictions without locating staff there.

The most radical proposal, called the “management company passport”, has therefore been given to CESR, the Committee of European Securities Regulators, for further consultation, with a deadline of 1 November.

Time is meanwhile running out. Unless the proposal is submitted to the European Parliament this autumn, it is unlikely to be ratified by the close of the current term next summer. And, in the bewildering world that is Brussels, proposals submitted in one term cannot simply be carried over into the next.

Ucits IV – representing nearly 10 years of Eurocratic work – could, then, end up in a filing cupboard. No, that is not just some journalistic exaggeration. It happened with Ucits II.

I read with great interest a recent article in Financial Adviser (Professionalism is an attitude not a qualification, 4 September) which argued that “the true meaning of TCF is that you deliver the service expected and deserved by your customer”.

The delivery of good customer service is fundamental to our industry and in particular is highlighted throughout the TCF principles. However, a recent YouGov survey found that fewer than one in five consumers believe they get good customer care from financial services firms.

Only the holistic combination of qualifications and regulations for IFAs, as highlighted in the RDR, intrinsically combined with a strong focus on improving customer service, will improve the perception of our industry.

Like many others, I believe that a chartered status qualification is the most suitable for the more sophisticated financial practitioners, and a minimum of diploma level for the mainstream.

Of course product providers also have a role to play in assisting IFAs with their professional development through adviser support services.

Embedding TCF in both providers and adviser practitioners will bring the importance of service to the forefront of our minds and encourage us all to be more customer-centric.

However, too often businesses are concerned with attracting new clients and lose sight of keeping the ones they already have. We must be mindful of this by maintaining the relationships we have.

There is clearly a long way to go to improve the industry’s ability to deliver good customer service overall, but its benefits can be very rewarding: 76 per cent of respondents to the YouGov survey said that customer service was either the number one reason or a key reason why they chose a provider.

In today’s economic climate, where there may be confusion and unease amongst consumers, even basic good customer service will help to educate and reassure them.

David Thompson is managing director of sales and marketing at Axa & Winterthur Wealth Management

The UK economy faces its most difficult times since the early 1990s but a recession is not a done deal and growth may revive next spring.

Pessimists point to stagnant second-quarter GDP – the weakest performance since 1992 – as evidence that the economy is on the brink of a downturn. Yet GDP figures are frequently revised, often significantly.

Early estimates also indicated no GDP growth in Q1 1999, Q4 2001 and Q1 2002. The latest revised data, however, show expansion of 0.4 per cent , 0.4 per cent and 0.5 per cent for the three quarters respectively.

Pessimism has also been fuelled by the OECD’s forecasts that GDP will contract at annualised rates of 0.3 per cent and 0.4 per cent in the third and fourth quarters, satisfying one definition of a recession.

However, the OECD quotes a standard error of 1.2 per cent for its projections, implying the forecast declines are not statistically distinguishable from a stagnant or even slowly-growing economy.

There are three reasons why the economy should avoid a full-scale recession of the sort seen in the early 1990s, early 1980s, and mid 1970s.

First, interest rates have risen by far less than before those episodes. Secondly, monetary expansion has not weakened to the same extents, at least not yet. Thirdly, the economy will receive support from the 15 per cent fall in sterling’s trade-weighted index over the last year.

A forecasting model based on these factors currentltly indicates a 45 per cent chance of a recession, defined as an annual fall in GDP. This is high, but readings of 75 per cent plus were reached before the last three contractions.

Longer-term economic health will depend on monetary and fiscal discipline. The MPC can be relied on to return inflation to target over the medium term, but public sector finances look increasingly shaky.

Even without further policy initiatives, borrowing is on course to reach £75bn, or more that 5 per cent of GDP, in 2009-10.

Bears should worry less about recession and more about fiscal profligacy.

Simon Ward is chief economist at New Star Asset Management.

He writes a regular blog at www.moneymovesmarkets.com.

This week a leaked letter from the British Bankers Association to the FSA offered us a fascinating insight into the way regulatory decisions are made by the regulator and what it calls ’stakeholders’.

This was in response to the FSA’s published desire to name and shame banks which fall down in certain key areas – mostly connected with ‘treating customers fairly’, like handling complaints and being responsible.

Needless to say the banks were unimpressed and rounded on the regulator through their trade association. But while it is the role of the BBA to represent its members’ views, it also has to play a part in keeping those members’ houses in order.

It’s no secret that in general, pan-industrial terms, banks demonstrate shoddy customer service in a variety of fashions on a frequent and seemingly willful basis – take overdraft charges for example.

So it was somewhat concerning for the association’s official response to come with a private letter full of the kind of barely concealed threats more commonly associated with ‘heavy’ gentlemen who go by names like ’slasher’ or ‘knuckles’ .

The concern expressed by the BBA over whether banks would stop co-operating with the FSA through the voluntary submission might as well have read: “This’s an awful nice place ya got here. Be a real shame if something bad were to happen to it.”

Their response was in particular a fear that the FSA’s proposed transparency reforms, would include publishing information about the firms’ performance.

The BBA’s stance about threatening not to co-operate is not on, banks should be transparent, because they are a necessity to the UK adult population, and the FSA should make this clear and it should do so publically.

Banks may be private businesses, who want to pretend this is an unwarranted interference, but they provide a service to everyone in the country who earns money or receives it through benefits.

And if people have no choice than to buy the industry’s products in some way then it needs to be regulated and greater transparency is part of that. It is the FSA’s move.

If you speak to irate intermediaries, the FSA is known as many things (which I cannot print here) but a title it is deservedly proud of is “consumer watchdog.” In recent months it has been showing it is a watchdog with bite by taking action against those who threaten consumers and clamping down on mortgage fraud.

The regulator has told lenders it hopes they will report intermediaries who could be embellishing their client’s income to climb the property ladder. At the end of August, the FSA also enlisted the help of the adviser community to tackle mortgage fraud.

It said it was important mortgage brokers were vigilant in ensuring they had sufficient controls in place to prevent their own firm from being used for committing fraud. This is quite right.

But, is it right that the FSA says it is under no obligation to pass on information about dodgy consumers who told outright lies to their adviser in order to get a home loan to the police authorities?

The FSA has a mammoth task in terms of keeping close tabs on the mortgage, insurance, investment and personal pensions industry. It has to monitor lenders, insurers, investment houses and intermediaries. It would be ridiculous to suggest they should also start sticking consumers under their microscope.

But what about the Proceeds of Crime act? Anyone who suspects financial crime has been committed should surely report what they know. The clients may not be regulated by the FSA but that should not let them off the hook if the watchdog found they may be guilty of wrongdoing.

Do you think the FSA should be forced to report on any dodgy borrowers they uncover when investigating mortgage intermediaries?

There’s never a dull day (well not too many anyway) working in the financial services industry and yesterday was a fine example.

Structured products, seemingly simple and boring on the outside, suddenly became rather interesting after the Investment Management Association threw its two pennies worth into the ring.

In a statement to journalists across the industry, Richard Saunders, chief executive of IMA, warned against structured products because of their lack of transparency.

He said promotional literature on the products should not be taken at face value because promoters are under no obligation to report performance, making it hard to assess the accuracy of claims about product returns.

His comments, however, promoted a storm of both opposition and support.

Dax Harkins, head of customer offer at NS&I, defended the products as a investment vehicle, saying: “Guaranteed Equity Bonds are designed for customers who are looking to make their first tentative steps into investing in the stock market and those who would like to do so without loosing protection on their original investment.

“In these volatile times people place a great deal of value on the guarantee that their money is safe.”

Mark Owen, Keydata’s director of sales and strategy, also defends the products, telling FTAdviser the IMA was wrong to slam them because they do achieve what they are designed to do.

“Structured products are very clear in what they can and can’t deliver, they are transparent because you know you’ll get your return it’s straightforward,” he says.

“A structured product can only do what it set out to do and people should look at the maximum upside.”

While Colin Dickie, director of Barclays Wealth told FTAdviser that he believed the IMA had taken a potshot at structured products at a time when there is a bull market.

“They have taken a bit of a narrow view. Structured products meet a need.”

However, according to Peter McGahan, managing director of Worldwide Financial Planning and a staunch opposer of structured products, it is an investment that is badly misunderstood.

He says structured products are designed for financial advisers at banks or for wholesale distribution because they suit those who do not want to go through the process of explaining to customers the potential for loss and return.

“Some financial advisers are shifting these products because they are an easy sale but don’t understand how they work.

“When you take the product apart and look at the potential for return it’s quite low. It looks like a nice headline rate but it means giving up a lot for not a lot in return,” he says.

For a market that is thought to attract around £8bn this year we thought it was a topic worth putting it up for debate.

What do you think of structured products? Are you recommending them to your clients? And are they being taken up in high numbers? Or do you think they do not represent a worthwhile investment?

Tell us what you think.

Two years ago I was asking government ministers whether they thought the ease with which people could borrow money in the UK was a good thing when compared with the hoops advisers and providers have to jump through to promote savings products.

One of the responses I received told me what we were in for. “I think the fact that people feel comfortable to borrow is a sign of the confidence they have in the equity in their properties” was that considered reply.

I have always been suspicious that UK plc has simply too much vested in keeping the housing market rolling forever upwards. Witness the speed with which a package of government measures has been flung together to try and keep the market moving: stamp duty reductions, enhanced lending packages, more shared ownership announcements.

Much of the recent consumer boom has been fuelled by the release of equity from property, and the retail markets have been kept buoyant by a seemingly reckless supply of easy credit.

The very factors that sent prices of average houses soaring beyond the threshold of average incomes, and the same factors that closed the doors to first time buyers unless they had wealthy parents or prospective lodgers in waiting, are now driving prices back again. Yet some people see this as a bad thing.

The market only works if first time buyers come to it. They will return, but not until prices have levelled out at a more sensible level. And when they do return they will need to have saved a deposit, because lenders will be more cautious.

All in all they will also be aware that property, which for many young people today had seemed the holy grail of investment choices, is just another asset which can go down as well as up. But with most other assets you won’t have borrowed to purchase it, and you won’t be at risk of losing it if other circumstances conspire against you.

I can’t help thinking that longer term a property market correction is essential to bring some sanity, and balance, back to the tension between borrowing and saving. Medium to long term saving has been fighting a losing battle in a world where easy available credit has meant the value of saving, and even investing, has been significantly undermined.

This correction may be painful for some at the moment, but is exactly what is needed for a healthier financial market for all of us all long term.

Steve Folkard is head of pensions and savings policy at AXA

Most investors who try to grow their money in long-only equities find themselves in a mental quandary. They’ve put their money in the stock markets because on a longer-term basis, equity benchmarks should outperform cash. But most investors hate to be benchmark huggers when markets underperform.

Although most retail clients will never have heard of it, the concept of tracking error might as well have been invented for them. In jargon, it is defined as the difference, measured in standard deviation, between the percentage returns a fund has made and its index. In plain English, it’s the gap between the money that has been made by your fund and the money you could have made if you invested in the fund’s benchmark.

Many investment managers, aware their clients essentially want benchmark returns but also want to outperform them a little, keep their funds within strict tracking error constraints. Investors can then happily suck up some beta while getting a good shot at alpha along the way.

For other fund heads, tracking error is an insignificant consideration, especially if their clients have little patience with benchmark and want absolute returns regardless of market conditions. But unless benchmarks start failing drastically on a 20-year horizon, tracking error is unlike to sound like an industry mistake.

Research published yesterday claims that a third of advisers are “unconcerned” about the outcomes of the Retail Distribution Review (RDR) and how it will affect their business. What a load of codswallop.

Sorry if that is rather blunt, but if the response to FTAdviser’s recent news articles and features on RDR are any indication, nothing could be further from the truth.

Concerned, confounded and outright angry advisers have all written in or rung us. Comments have ranged from “the RDR as currently contemplated will actually have an adverse effect on the savings, protection and retirement gaps” to questions like “why do we need to ban commission for IFAs when the banks can carry on as normal?”

Another reader arguably represented the intermediary masses most succinctly, by saying the RDR would create “a two-tier adviser market leaving less well-off
consumers more vulnerable to poor advice via the banks and multi-tied”.

I wouldn’t be surprised if that particular comment encouraged a resounding shout of “hear hear”, as the intermediary community is anything but “unconcerned”.

Instead the majority want greater access and dialogue with the regulator, so that their side of the argument can be best represented.

And why wouldn’t they, when the FSA is talking about turning everything from the industry’s structure, to the qualifications required, to how advisers are remunerated on its head? Reforms which Standard Life has warned could force upwards of 15 per cent of advisers to either retire or exit the industry

But pushing forward with a two-tier model and changes to remuneration is unlikely to help the group of consumers most in need of good financial advice – those that simply can’t be bothered.

As one adviser pointed out, the existing independent distribution model produces 80 per cent of product distribution with as few as 4 per cent of FOS complaints. These are figures from one of the FSA’s own representation to the Treasury Select Committee in 2005.

So advisers have again raised the question of whether the regulator is tinkering with a distribution model that isn’t actually the root cause for the ‘lack of consumer confidence’ at the heart of the RDR reforms? And whether the finger of blame for any inefficiencies and poor outcomes for consumers be better pointed at the system of regulation instead?

That doesn’t sound too “unconcerned” to me.

It was only a matter of time, one can suggest, before Clive Cowdery was going to come back at Friends Provident.

That embattled company has been the subject of many a beady eye of acquisitive companies, and Cowdery is certainly having another go to see if he can do something productive with it.

Yet unlike other predators – private equity firms in particular – who have looked in FP’s direction, Mr Cowdery’s return to the fray is likely to spice things up a bit.

This is for two reasons.

Firstly, that Cowdery is a highly successful entrepreneur who very much does things how own way, and is already familiar with the company, after backing out of a merger last year. For all the panache and experience of other suitors, Mr Cowdery has an impressive track record, which is likely to make FP’s shareholders take what he suggests seriously.

However, the circumstances are now different. The troubled life assurer now has embarked on its own rescue plan, which the City is minded at least to give it some time.

On top of this, and perhaps most importantly, is that Friends has a new chief executive in charge, in the shape of Trevor Matthews, who has a track record at Standard Life, and a reputation to maintain. He will have his own set of ideas, and the enthusiasm of tackling the difficulties at FP with a full arsenal at hand.

If nothing else, the next few weeks could see a clash of two worthy adversaries, and the developments will make interesting reading for us all.