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FCA urges wealth managers to spend less time on regulation

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Wealth management firms’ boards should spend less time on regulatory issues and focus more on managing their business, the FCA says.

Speaking at the Wealth Management Association summit today, FCA chairman John Griffith-Jones said the regulator is concerned firms are focusing on complying with its rules at the expense of clients.

He said: “FCA acting chief executive Tracey McDermott is concerned that boards are spending too much time on dealing with regulation rather than taking care of the business.”

However, Griffith-Jones acknowledged the increasing regulatory burden many firms are facing.

He said: “I accept we have a huge burden of regulation. I think in the long-term wealth management businesses will flourish if they provide valued and trusted service, so there will be less regulation.”

Griffith-Jones also said the need of “constant protection” for firms has increased especially with the pension reforms and “the inevitable complexity of such a new system”.

He says: “This demonstrates we need wealth managers to continue to have good conduct, but you have to have good conduct for yourself not for the regulator.”



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There are 13 comments at the moment, we would love to hear your opinion too.

  1. Can I suggest Mr Griffith-Jones read the FCA papers on behavioural economics, substitute the word ‘economics’ with ‘regulation’, add in the ‘shoot first and ask questions later’ attitude, and ask himself why firms behave the way they do? Firm’s behaviour is led by the FCA in this respect, you need to look closer to home for a solution.

  2. Is this bloke a prize plonker or what?

    Why does he think firms concentrate on compliance, or does he think at all?

    For his edification in this compensation culture world (which Regulators have to a very large extent created) the first rule of compliance is CYA* – and that takes a lot of time and effort.

    *Cover your posterior.

  3. Interesting. The FCA want an end to the arms race? Good idea – but how?

    It’s one thing to tell people “you have to have good conduct for yourself not for the regulator”, another to incentivise or rebuild a culture where fair-dealing is expected as a basic minimum.

    There’s a sniff of the General Melchett’s about it. Sounds like one of those sorts of messages from the headmaster… that makes the whole school roll their eyes.

    Are the FCA so used to dictating that they cannot hear themselves any longer? It’s about as much use as commanding someone, in a loud Melchetty voice, to “have more confidence”… yep, that’ll work.

    The lack of practical, let alone emotional, intelligence is staggering. How are they going to get executives out of self protection mode, having gotten here?

    To revert to the school metaphor the only feasible solution is a new regime. Trouble is they’ve faked it and fluffed it so many times that’s going to be a very though thing to pull off.

    Who would be up to it? …and I wonder how the search for a new head, sorry, CEO is going?

  4. This is beyond belief! April has come early, surely? Then to say “……I think in the long-term wealth management businesses will flourish if they provide valued and trusted service, so there will be less regulation.” (how the hell do you think a Wealth Management/Financial Advice/Financial Planning firms, call them what you will, could survive if they didn’t ALREADY provide valued and trusted service? It beggars belief!) Well it – less regulation – hasn’t happened in nearly 30 years has it? Maybe long term is 50 years. Who knows? The regulator clearly doesn’t! The evidence of successful regulation has to mean a gradual reduction in the need for regulation itself over time as the bad boys and girls would have been driven out/found out and the remaining participants would and should be of a higher calibre and hopefully in it for the long term and hopefully hold higher ethical standards – so why then has the regulatory environment been a one way ratchet ever since it commenced in the late 80’s? Regulation is nearly always incremental. But the light of failure shines back so bright its almost blinding. Why are so many of us sick to the back teeth of the fees and injustice of the regulatory system on those who try to do the right thing by their clients? Turkeys don’t vote for Christmas and Regulators don’t vote for less regulation, whatever their ‘political’ comments at a conference might suggest. None of us on this side of the fence has any doubt that the missives will keep coming out of Canary Wharf. There’s a whole industry of fear built on this madness for goodness sake. It’s a little like waterboarding. When it goes too far and you think you really are going to drown, they ease off on the torture – only to start again once you’ve got your breath back. Melodramatic I know, but hopefully you get my point. I’m going to have to take another tablet now and it’s all MM’s fault for reporting this garbage. Unbelievable.

  5. So Mr Griffith-Jones, does that mean we can stop wasting time collecting information for and completing GABRIEL reports which you appear not to bother reading anyway, judging by the fact that firms are still failing and costing us money via the FSCS? No? Didn’t think so…

    • That would be an impressive first step. If you can’t help yourselves from being obsessive data collectors, then at least show us some practical examples of just how all this helps deliver better consumer outcomes because that is a question that continues to mystify me

  6. Firstly, you take the industry out so far, when you know they cant swim.
    Then (when you realize they are drowning) you blame them for not staying close to the shore !

    JGJ; I do have some choice words to describe you and your work ethic, but for now I will just shake my head with a hearty snort of derision.

  7. A detachment from reality.

    Look at the FOS, look at the design of suitability letters, look at the claims culture fostered in part by the difficulty in meeting the FCA/FOS rules.

    I suggest the gentleman avail himself of reality by spending a day at my office. If I am able to work for 60% of the day then it’s a good day, otherwise . . .

  8. Whilst the sentiment is nice, the thinking behind it is delusional and the wording just makes the FCA look inconsistent and out of touch. If this is the ‘tone from the top’ or whatever the phrase was that the FCA said should apply to the ‘TCF culture’ within firms, it adds yet more confusion to an already obscure message/regulatory stance. Presumbaly, he is in the ‘good cop’ role with this placatory nonsense.

  9. I’d have to assume that this is in some way mis-reported. If it is not then I would suggest that the very best thing would be for Mr Griffiths-Jones to step down as he clearly has no understanding of what it is that his organisation actually does.

    Maybe a new rule could be that everytime a senior member of the FCA board says or does something that is provably stupid they had to, lose their house for example, then maybe they would know what risks those that they regulate face.

  10. And if complying with the rules isn’t focusing on clients what’s the point of the rules??? There is something seriously wrong here…

  11. You really, really couldn’t make this up

  12. I was discussing this article this morning with John Reilly on my way to work and it suddenly occurred to me why regulation has become such a massive and overarching burden.

    In the old days (which were surely better than where we are now), things were relatively straightforward. The regulator issued good practice guidance on the points that needed to be covered in formulating and documenting recommendations and, to a fair extent, advisers could use their discretion as to how closely they followed that guidance. If they left something out and the investment (or whatever) turned out badly, the client had the right to complain. Because the adviser had decided to omit something from his letter of recommendation, he might find himself unable to rebuff the complaint and would have to pay compensation. Everybody understood that and, by and large, it worked pretty well ~ didn’t it?

    Advisers didn’t have to contrast and compare every conceivably suitable product on the market and nor did they have to write War & Peace (which the client probably never read anyway) to justify every recommendation. But clients still had protection against bad or unsuitable advice. What was wrong with that? It worked pretty well, did it not? For example, a client might have been persuaded to invest in a portfolio of funds that wasn’t appropriate to his ATR, CFL and all that but, if it all worked well, so what? If it didn’t, on the head of the adviser it would be and the client would be compensated for unsuitable advice. If the adviser went bust, the rest of the adviser community would pick up the tab via the FSCS. Not entirely fair on the rest of the adviser community, of course, but at least it worked and advice was less costly and more accessible.

    But, some years ago, the regulator’s philosophy changed. The above system was deemed no longer good enough. Rather than clients being protected against the ACTUAL consequences of a bad outcome, from now on they were going to have to be protected against the POSSIBILITY of a bad outcome, even if that bad outcome never actually materialised. That elusive pot of gold at the end of the rainbow. The adviser community was going to have to be absolutely PERFECT in every respect, even though the regulator itself has shown itself time and time again to be so manifestly IMPERFECT in so many respects.

    And nobody was at hand to yank the reins on the regulator and say: Hang on a minute, this is a completely unrealistic way to try to regulate, the primary reason being that there were simply no reins to yank. The FCA, like the PIA before it, has (until just recently) been an unbridled monster, free to trample roughshod over any one and any body that dared to try to stand in its way. The Statutory Code of Practice for Regulators was casually and totally ignored and, as I found out from my own correspondence with the BERR and the Treasury, was completely un-policed. Even the TSC appears to be completely oblivious to it. What was the bloody point of the Code if it can be completely ignored and nobody does anything about it?

    And that, I suggest, is the principal reason for the advice gap and why the Treasury has finally stepped in to knock a few heads together at 25 The Colonnade.

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