Just how much worse can the FSA’s endless stream of new initiatives be allowed to get?
The replacement of regulation by hindsight with regulation by predictions handed out by overpaid and underqualified people with no experience of running a business, much less being an IFA, is positively Kafkaesque.
There really is no other appropriate term. How can any IFA possibly defend himself against a purely subjective, predictive judgement as to what may or may not happen in five years time as a result of advice he is giving today? It is like censuring a travel agent for having failed to predict a poor summer when taking bookings in January.
And this after more than 20 years of regulation at truly monumental cost to the industry in terms of both money and damage to its reputation, not to mention damage now to the national economy. All the FSA seems to want is more, more, more more staff, bigger salaries, bigger bonuses and more new initiatives to replace the last one to have failed. Just more, more, more.
Hector Sants is quoted as saying: “A principle- based approach does not work with individuals who have no principles.” What a stupid and meaningless statement. He may as well have said that the country’s legal framework does not work with individuals who have no regard for the law. So what he now proposes instead is regulatory enforcement along the lines of the Tom Cruise movie Minority Report.
The trouble with this fatuous idea is that although the FSA employs 2,800 people at an average cost to the industry of £140,000 a year per employee, among all those people are no clairvoyants. In fact, not only is no one at the FSA able to see trouble brewing right under its very nose but all the evidence demonstrates that the FSA refuses even to listen when people try to tell it what it should be taking steps to address.
I never understood why the FSA and before it the PIA were so dismally incapable of creating a practical, workable and manageable rulebook which would constitute a sound and comprehensible reference framework for good financial advisory practice.
Why is it that the FSA is so utterly hopeless when it comes to prescriptive rules- based regulation? Tell us what you want and how we should be doing it and we will do our level best to comply.
For example, a good approach as far as products are concerned would be for the FSA to analyse each new product, identify inherent risks and notify the industry of what it needs to be sure to draw to the attention of its customers when advising on each product. It really is not rocket science, is it?
If the FSA had done that, there would never have been all the grief over split-capital investment trusts or the anxiety that people are experiencing over their pension income drawdown plans or the disruption being faced by people who overborrowed to buy houses that they simply could not afford or the people who have run up impossible to repay balances on their credit cards.
The list goes on and on. Yet the FSA saw none of this coming. But, hey, never mind. Hector’s latest idea will sort it everything out once and for all and we will all live happily ever after. Yeah, right.