Is the regulator trying to reinvent itself while increasing its power and influence by stealth? I have read two things about the regulator that made me stop and think about the direction that it may be heading.
The first was Lord Turner’s comments about a new approach to include regulating product design as well as their marketing and distribution. On the surface, this might not be such a bad thing. The next story was about the proposed new consumer protection committee made up of specialists from the FSA, the OFT and the Financial Ombudsman Service. The crux of the proposal is this – despite 23 years of statutory regulation, it has failed to anticipate and ward off consumer scandals, so now they are creating a tripartite committee to do something about it.
It does sort of make sense and supports the case for some form of product regulation with a committee to head off problems before they arise.
But if the last 23 years have shown us one thing, it is that regulation for regulation’s sake does not work and all I am hearing is more talk about yet another layer.
The cynics will have noticed this proposal is not dissimilar to Conservative plans for a consumer protection agency and, by getting in early, they will secure “jobs for the boys. You have to question the competence of whoever is appointed to the committee and what knowledge they have of product design, after all, they do seem to have failed to recognise toxic products in the past. Will we be faced with a wave of bland products from now on?
There have been calls for product regulation in the past and the idea does have merit, if only for a suite of basic products, although that has been tried in the past under various unsuccessful guises.
The problem is that regulation brings with it cost and if products are to become regulated, there needs to be some trade-off in the regulation of
marketing and distribution. The consumer cannot absorb even more regulatory cost and neither can the industry but, let’s face it, who else can they ask to pay?
The other disappointing aspect is this will involve yet more change, more consultation and more uncertainty. Everyone I talk to would just like to have a period of stability, some time to allow the existing changes to be embedded into their businesses properly without looking over their
shoulders at the next wave of change. We have enough on our plates without having to cough up more money for another bunch of “experts” to
come up with more regulation at our expense. It’s time to stop the gravy train.
Dennis Hall is managing director of Yellowtail Financial Planning