View more on these topics

FSA: Industry is not learning from past misselling scandals

The FSA says the industry is failing to learn the lessons of previous misselling scandals and claims it only has itself to blame for low consumer confidence in the financial services sector.

Speaking at a City and Financial conference in London earlier this week, FSA acting director of enforcement and financial crime Tracey McDermott said confidence in financial services was at an all-time low.

She claimed its reputation will not recover unless the public feels it will be dealt with fairly and professionally by financial services firms.

McDermott said: “The past few years have seen ever-increasing penalties for retail failings. Redress to customers from enforcement cases in 2011 alone exceeded £200m. And that is not to mention the significant sums which are being paid out in relation to the misselling of PPI.

“Yet, despite this, we continue to see failings which indicate the industry is not learning the lessons. It is not properly fulfilling its mandate of giving good advice to those who need it, ensuring markets are fair and that, where risks are being taken, they are understood.”

She cited the inappropriate investment advice given by HSBC subsidiary Nursing Homes Fees Agency to elderly investors, and advice to invest much of a client’s retirement fund into unregulated collective investment schemes as examples of the industry’s continued failings.

She added: “It is really no wonder that confidence is low and the industry, frankly has no-one but itself to blame.”

McDermott also discussed the new powers the Financial Conduct Authority will have to intervene at an earlier stage where it sees risk of consumer detriment.

She said the FCA will act where products seem useful but where a firm’s sales processes look likely to lead to significant misselling.

The FCA will also look to take action, including enforcement action, where aspects of a firm’s business model, such as product selection, remuneration, training or recruitment, risks poor consumer outcomes.

She added: “Obviously early intervention comes with risks, and with potential downsides for the regulator, the industry, and most importantly, for consumers.

“So the FCA will need to be targeted and proportionate in when, how, and why we intervene. We will also need to be prepared to be much more transparent, within the bounds of statute, about what we are concerned about and why.”


News and expert analysis straight to your inbox

Sign up


There are 23 comments at the moment, we would love to hear your opinion too.

  1. By “the industry”, I assume that Ms. McDermott is referring predominantly to the banks, given that the scale of mis-selling activities perpetrated by a few IFA practices, by comparison with those perpetrated by the banks, are smaller by a considerable order of magnitude.

    And what about the damage done to the reputation of the industry as a result of the FSA’s failure to act on so many occasions ~ Keydata, HSBC/Aviva, MPPI, Northern Rock etc, etc?

    But no ~ it’s all the fault of the industry, never the regulator.

  2. It’s like the police blamning householders for a big increase in burglaries. Surely, the risk of being caught reflects the level of crime. One of the gems recommended by my local police concerned where to hide your car keys. This was in a report in the village mag. Do they think that criminals can’t read or just that they never read out magazine?

  3. Derek Bradley ceo 24th February 2012 at 10:47 am

    I think the IFA community would feel somewhat slighted to be parked in the same ‘lot’ as Banks where most of this has taken place.

    If as she says the industry “is not properly fulfilling its mandate of giving good advice to those who need it, ensuring markets are fair and that, where risks are being taken, they are understood,” then what is going wrong with a regulatory framework, set up by the FSA many years ago, that has allowed this bad practice to continue?

    Tom Baigrie was correct in saying “it is the rule-makers not the rule-breakers who are chiefly to blame because the Treasury and regulator have been unable to resist increasing their responsibilities to the point where no body in a free society can adequately discharge them. Rather than confining themselves to weeding out conmen and fraudsters, they have set out to ensure there is no way a consumer can strike a bad financial services deal”.

  4. FSA are doing a brilliant Job 24th February 2012 at 10:51 am

    What a mavelous job the FSA is doing !!

    Why not get some more staff, levy a bit more money and carry on with the sterling work. Oh and dont forget to pay yourselves a bonus.

  5. I cannot disagree with McDermotts comments however, like Julian, I feel the failings of regulation are the biggest issue rather than blame ‘the industry’. It is far to easy and a cheap shot.

    Surely it must strike the politians and regulators worldwide that the financial crisis happened at the same point in time when we have more regulation than ever before.

  6. Joe Egerton - Justice in Financial Services 24th February 2012 at 11:01 am

    And the FSA has clearly forgotten how to handle misconduct by fund managers – contrast Capita and Arch Cru with MGAM and Peter Young

  7. I’ve posted this e petition in an attempt to get MPs to put pressure on the FSA to take action against bank directors and senior management with control functions that are found to be responsible for miss-selling and making sure that these individuals are banned from the industry or personally fined just like an IFA would be.

    I think it is very unfair that IFA’s and mortgage brokers are fined or banned if they are found to be responsible for miss-selling but the same is not true of our banking institutions even though the FSA does have the power to do so.

    Please take a look at the below link and sign the petition as things will not change until we get the FSA to enforce the rules for all!!!

  8. On the one hand, it is very easy to rise to this comment and ram home the message once again that the FSA doesn;t seem to learn from it’s own far more damaging mistakes and for them to have this sort of brass-neck is taking a very large biscuit.

    On the other hand, they are of course correct.

    The “industry” does have itself to blame for the low esteem advisers are held. I use “advisers” here to highlight the lack of differentiation that consumaers apply and indeed it is worth pointing out that the FSA does occasionally refer to advisers as salesmen. What hope the industry if the regulator cannt differentiate between the two?

    Banks may be the biggest villains here of course, but there are sufficient numbers of other advisers who are in for the fast buck, treating clients like cash cows to allow the mud to stick to the “industry”.Most of those advisers are of course in the salesman bracket.

    Bottom line here is that we have a confused industry regulated by a bureaucrat that has lost credibility and is simply lashing out at anything and everything.

    The industry has to improve itself, but it also needs to force the regulator to improve itself too or we will just lurch from farce to farce.

    It will always be pssible to find something to criticise anyone’s work if one looks hard enough and it seems to me that this is what the FSA is going to continue to bank on, whilst steadfastly refusing to see fault in its own pathetic performance.

    Ian Coley
    Medical Investment Services

  9. As it is not the iFA sector needs fixing (with some exceptions) why do we all continue to be tarred with the same brush, especially as consumer confidence in IFAs is extremely high.

    Maybe ALL advice in future should be conducted under the IFA banner and close down all direct sales channels.

    Hmmmm! There’s a thought!

  10. If confidence is at an all time low. what Tracy appears to be saying is that 26 years of regulation and £bn’s of other peoples money have worsened rather than improved the outcomes for most people.

    I predict that the situation will be worse after RDR which is driven by regulators and delivers a financial services landscape which is miles away in terms of complexity and accessibility to what any consumer might want.

  11. I’m amazed that she is mentioning the NHFA/HSBC thing. I don’t think the FSA comes out of that one at all well. They had given NHFA a clean bill of health several times AND NHFA didn’t missell to the elderly but generally provided pretty good advice.

    Would appear that the FSA didn’t understand the advice that was being given which is why confidence in them is at an all time low.

  12. I’m beginning to actually hate the FSA and everything they do and everything they stand for.

    How are they allowed to ruin so many livelihoods and businesses with no accountability for their own actions?

    I am totally fed up with what was once a great place to work and want to get out asap.

    What is going to happen to Hector and Sheila when the TSC realise that the 10% ‘acceptable’ reduction in IFA’s due to RDR is going to be four or five times that amount….probably nothing I guess.

  13. For most people perception is reality. As such people reading all these stories regarding mis-selling will not think that IFA’s are the good guys and the banks are the bad guys. They will lump everyone together and be distrustful of the whole lot.

    Also the notion that IFA’s are whiter than white when compared to banks is a load of rubbish. A lot of the advisers working as IFA’s have come from a bancassurance environment. As such they will still have the same attitudes as they had when they worked as bank advisers. The only difference will be that they will be under less supervision and as such they will be in an environment where they can actually get away with more than they could have done at the bank.

  14. Once again the FSA throws up a smokescreen to hide its failings.

    Is the lack of public confidence aimed at the industry or the regulator?

  15. How dare she!! The FSA and the like are so far removed from reality it’s unbelievable. How they can count the IFA community in the same bracket as Banks which is where the current problems lie with consumer confidence is outrageous. There faliure to act on so many levels over recent years brings us to where we are now and if anybody or organisation is ‘not properly fulfilling it’s mandate’ it’s the FSA and the likes of Ms McDermott!!

  16. Please sign e petition

    Should action be taken against Bank Directors for PPI insurance miss-selling?

  17. Another FSA speaker who lives in never never land who will probably resign soon to go to a nice city job leaving the industry destroyed!

  18. If only the FSA would learn from its history of mis-regulation, arrogance, irrationality and hunger for power.

  19. As I’ve said elsewhere, one cannot disagree with the specific instances she cites as they cannot and should not be defended. These comment are however unhelpful in my opinion and bound to cause the outrgae expressed by many both on this site and others.

    Maybe Ms McDermott is looking to make an impression, which she has done however only she can determine if it has been the right one.

    It would be very easy to make a similar speech in connection with regulation since 1988 however I don’t believe it would add any great value or lead to improved outcomes.

  20. Dear Tracey

    Be carfull what you wish for as its the mistakes that keep you in a job !!

    Mind you RDR will sort all this out (haha bloody ha) so be sure to clean your shoes for you meeting with your case handler at the DSS.

  21. Why did the money advice service not do enough due diligence on A4E, who are also the “chosen delivery partner” for the MAS”. A4E now has 4 ex employees arrested on suspicion of fraud.
    They only have themselves to blame!

  22. The only advice that bank salespeople provide, indeed the only advice that they’re equipped to provide, is to match their customers’ apparent needs to the very limited range of products that they’re under pressure to sell them. EVERYBODY knows this.

    Yet, despite having declared publicly its disapproval of target-driven product-selling cultures, the FSA refuses to take action to curb the way in which the banks operate.

    One good step in the right direction would be to ban bank salespeople from calling themselves advisers and instead insist they may describe themselves only as what they really are, namely sales consultants. Were the FSA genuinely concerned about ensuring that members of the public understand clearly and unambiguously just what type of intermediary they’re dealing with ~ tied, as opposed to independent ~ then surely it would have announced such a requirement years ago. As ever, actions speak louder than words.

    This distinction is fundamental and might well go a long way towards preventing the banks’ standard practice of suggesting to customers that although we may not be WoM, what we offer is best of breed, so why would you need an IFA, who’ll very probably demand that you pay a hefty fee, whereas we don’t charge fees at all? Dirty tricks, or what?

    It’s plain for all to see that virtually all the major mis-selling scandals since time immemorial have been the responsibility of the banks. So why doesn’t the FSA take simple and meaningful action to prevent them continuing to happen instead of dishing out fines (without individual censure) in the wake of one motorway pile-up after another? Isn’t this failure from which the FSA itself ought to learn a lesson?

    Answers on a postcard please.

  23. Headline should read:

    “Regulators are not learning from past misselling scandals”

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm