So farewell Hector Sants. It is unfair to blame the man alone but has there ever been a more disastrous period in the history of Britain’s financial risk management than his period in charge of it? Could anyone have watched the wrong ball for longer?
It is perhaps a shame to see the man who has now learned so many lessons, moved on by the modern civil service culture, no doubt to learn more lessons, controlling a new field. I wanted you to stay, Hector, so you could bring experience and mature caut ion to regulation, instead of the adoles cent enthusiasm for change and progress that retail financial services has endured from you and your predecessor.
While the above blurs the macro and micro sides of regulation, the truth is the columnist knows nothing much about the former and 20-odd years more than Hector about the latter. Micro in this context means being concerned with individual con sumer outcomes in finan cial services transactions, alth ough its allusion to medd ling and boxticking has also been borne out these last three years.
Thus the Conservative plan to split macro and micro makes real sense, if it can be properly managed through, because the culture needed to do either job is totally at odds with the other.
In the case of the micro, or retail side of financial services regulation, the key is the compromise between what works for the seller and the
buyer. Focus only on the latter, as the FSA has done since 1987 and, as that most mighty consumer champion Jeff Prestridge acknowledges, you make the former ever less able to grow and improve their service. And when the country’s economic health depends on that service being provided, you end up exactly where we are now, with prudent consumer financial behaviours and experienced financial adviser numbers in headlong retreat and savings ratios and IFA recruiting at record lows, all as the regulator eats its small paymasters one by one.
But for every loser in life there tends to be a winner and it is easy to spot those. Just look where the regulatory touch has been lightest. Debt
had its (dark) day in the sun, blossoming until the regulator spotted it, and now, just when easy money is economically needed, so the regulator ratchets up the controls.
And non-advised selling is the current beanstalk, with its market share in protection predicted to double this year and Peter Hargreaves the living proof that you make profit best by wisely working around the regulator, not with it.
So Hector’s successors then – for the Conservatives envisage two of them – face very different futures. Macro-man at the Bank of England has his path laid out but Micro-man will, I expect, be told to protect the wider consumer interests, by relaxing a little on the need for perfect outcomes and thus allow again the profitable promotion of savings, pensions and protection.
Advice is not on that primary list. Hector’s eye for the wrong ball has made the non-advised sellers’ triumph certain. The best advice can hope for is that Hector’s successor will be told to turn the RDR around and use it to grow the ranks of the IFA, as the proven best server of consumers’ needs.
Tom Baigrie is managing director of LifeSearch