As time goes on, it becomes increasingly clear the regulator is building a very significant “too-difficult” pile. Quite apart from the health and safety issue this creates, my main concern is that it is not at all helpful to the public at large. Nor is it helpful to advisers, irrespective of their type or proficiency.
As more and more opaque and complicated products seem to appear, there is an even greater need for the FCA to determine what should be marketed to the public and what should not. This, of course, leads on to the debate as to what a professional investor is, which, depending on whose website you look at, is greatly variable.
The regulator was recently asked whether it would consider a ban on unregulated or non-standard investments from Sipps. It responded by stating that effective due diligence checks by Sipp operators were a more proportionate way of protecting consumers than an outright ban. This is a response devoid of merit at any level. Pushing the problem on to someone else does not always solve it. But, then again, this is something the FCA has a track record with.
So there needs to be greater lateral thought in what is regulated and what is not. With several employee benefit consultants getting ready to promote collective defined contribution schemes in a way that could see them billed as “DB lite”, the need to provide advice – collective or otherwise – to members and the regulation of those firms become even more appropriate.
This could be in the form of better and stronger disclosure rules for occupational schemes which, to be fair, the Department for Work and Pensions is beginning a process of consultation for. At the same time, we need both the FCA and The Pensions Regulator working in tandem to develop a strategy as to how the marketing of these CDC schemes is going to be policed.
At the moment, employee benefit consultants are largely unregulated. Some may state they are regulated via an approved professional body status through the Institute and Faculty of Actuaries, but this is not the same as the regulation being applied in retail financial advice – either in terms of strength, supervisory depth or enforcement. Nor do the firms under APF status pay anything towards the Financial Services Compensation Scheme.
We need to ensure the regulation delivers for the consumer. After all, that is a key requirement of its function. It is not good enough to suggest things are too difficult.
If things are too difficult to regulate, I would argue they are too difficult for people to understand – ergo, they should not be marketed.
So whether it is complex investments or CDC schemes, the public deserves something that is fair, clear and not misleading. Passing the buck is not a viable long-term option for regulators.
Rob Reid is principal of CanScot Solutions