blog (1)     
subprime

The selling of dementia-related service products bears an uncanny resemblance to the selling of securitised mortgage products

There is a need for high quality dementia services in the United Kingdom. There are about one million people living with dementia currently, and there are many services which might be relevant to them: like adequate signage to improve spatial navigation, good advocacy services, good advice for ‘dementia friendly wards’, good assistive technologies, and so on.

Some of them will be regulated, such as adaptations which are in fact ‘medical equipment’. And it is in a sense the buyers’ market, in that buyers can choose which product to go for. It is a booming economy.

Everyone likes a bandwagon. A bandwagon for dementia service products might be as lucrative as a bandwagon for securitised mortgage products, particularly if there’s a “buzz” somewhere.

For six years, the basic narrative – accepted by commentators and politicians – has been that securitisation, in essence a way of transforming one type of assets into another one, was the primary reason for the global financial meltdown, especially in the US sub prime market.

But the situation there is turning out to be more complicated than at first glance. US sub prime mortgage products aside, the performance of the securitisation market to date has actually been very creditable and, in some cases, better than other, more conventional investments.

Likewise, even before the Prime Minister’s Dementia Challenge, it is true that there were some very creditable offerings on dementia-friendly designs and assistive technologies.

There’s now a market for dementia services, like there was for securitised mortgage products. But when they go bust, there are three options for what to do next.

Firstly, one can blame Gordon Brown.

By this mean, the current Coalition government blamed Gordon Brown convincingly for ‘crashing the car’, when patently the economies suffered in other jurisdictions not due to Gordon Brown

If these dementia services products go bust, as such there will nothing that can be done, other than a market which has burnt out.

Secondly, one can blame the buyer.

The English law has a long tradition of ‘caveat emptor’, where the buyer is expected to do due diligence of what he or she is buying. There is an added complication here in that a failure of a duty of care by a middle man, such as an advisor, might be implicated if these products go bust. This can happen for securitised mortgage products, as well as dementia services products.

Thirdly, you can blame the regulator.

You could blame the financial regulator, or even abolish it (like what happened to the Financial Services Authority). In healthcare, likewise, you could simply abolish the regulator and start again hiving off parts into various functions. But this depends on how closely the regulator has been in promoting the product to begin with.

If a regulator has failed to do due diligence, the regulator will be blamed by people who have bought the product if the product goes bust.

In theory, the financial regulator can ‘stress test’ these products, to see how these financial products behave in a real environment. The options for the regulator means assimilating as much information about the product as possible.

In the case of financial services, this might include: does the product fulfil a legitimate need? In the dementia world, a dementia service product could make it easier to promote one of the 6Cs in nursing, or to prove your commitment to person-centred care; this is helpful for ticking boxes.

But again it’s a matter of due diligence; while regulatory capture can mean substantial competitive advantage for the seller of the dementia service product, the regulator is expected to show some understanding of the validity of the product.

So what can I conclude?

Nothing much. Just hope to hell that the luck doesn’t run out for the sellers of dodgy products; this might be as catastrophic for the dementia economy world, as the world macroeconomy.

Share This: