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Govt casts its shadow over the FCA

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2015 was the year the Government cast a looming shadow over the FCA, from dictating the regulator’s workload to ousting its senior management.

The controlling hand of Government in regulatory affairs was made abundantly clear in July when it was announced that FCA chief executive Martin Wheatley would be stepping down. A statement from Chancellor George Osborne thanked Wheatley for his tenure but added: “The Government believes different leadership is required to build on those foundations and take the organisation to the next stage of its development.”

Independent regulatory consultant Richard Hobbs says: “The Government has fallen very much out of love with its regulator, and as a result there are going to be significant changes. It seems like the banking lobby is finally being listened to.”

The Government also set the tone on the FCA’s priorities. Following the rollout of pension freedoms in April, the FCA was charged with putting in place a framework to govern Osborne’s flagship reforms.

In July, Money Marketing revealed the types of pension freedoms complaints consumers were bringing to the Financial Ombudsman Service. Complaints mainly centred around the way providers were allowing consumers to access pension freedoms, poor service and delays and frustrations over the requirement to take advice for safeguarded benefits worth more than £30,000.

But the dominant issue has been insistent clients. Advisers have been concerned about future liabilities should they process a transfer despite advice not to do so, and the FCA was forced to issue guidance on dealing with insistent clients in June.

But law firm DWF partner Harriet Quiney is not convinced the insistent clients challenge has been resolved.

She says: “There is more clarity than there was but a lot of people are still concerned about what to do if an insistent client approaches them. A lot of networks have taken the view they will not advise insistent clients because it’s just too risky. They don’t feel confident that if they give appropriate advice, but ultimately do what the client wants, that they will be protected in the long run.”

The disquiet over insistent clients and pension transfers has also extended beyond the advice market to Sipp providers. In May, Money Marketing reported how Sipp providers were coming under increasing pressure to intervene on pension transfer advice, and block transfers out of defined benefit schemes that are not in clients’ best interests. The contested case of Berkeley Burke, in which the Financial Ombudsman Service found the provider had failed to carry out adequate due diligence on an unregulated collective investment scheme, continues to be reviewed by the FOS.

Quiney says: “There is a big concern around how the FOS seems to be forcing obligations on Sipp providers. For a Sipp provider to be told they should have told a client an investment was unsuitable is frankly ridiculous.”

EY senior adviser Malcolm Kerr says: “2015 revealed a major challenge for the regulator: ‘how do you regulate the unregulated?’ For example, Sipps, where the data is around the wrapper not the unregulated product. Or pension freedom scams. Or, dare I say it, leveraged film finance investments.

“Add these issues to the concerns raised by the wealth management thematic review, and many other ongoing inquiries, and 2016 will see lights burning in the windows late at night at the FCA.”

Expert view: Richard Hobbs

Despite the fact there has not been a change of Prime Minister or Chancellor, we have had a change of Government at the general election. It became clear it was the Lib Dems who were driving a lot of financial services public policy, such as banker bashing, and it’s people like Vince Cable who were keeping Martin Wheatley in a job.

Our politicians play a rather sophisticated game. They create arm’s length regulators so they do not get the blame when things go wrong. But when things do go wrong and they think the regulator is at fault, they quickly start to influence the agenda. If you do not dance to the Government’s tune, as happened with Wheatley, then you will quickly find yourself dumped.

The mood music has changed, both at a UK and European level, and now the conversation is not about more regulation, it’s about potentially having too much.

Whether there is significant deregulation or not remains to be seen, but it looks like the high tide mark for regulation has been passed.

Richard Hobbs is an independent regulatory consultant



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FCA chief executive Martin Wheatley was forced out of the regulator over his handling of the closed-book debacle and tumultuous relationship with the banking industry. It was announced last week that Wheatley will stand down from 12 September, with director of supervision Tracey McDermott acting as interim chief executive. A statement from Chancellor George Osborne, […]


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Frustrations over advice requirements and provider delays are dominating calls to the Financial Ombudsman Service in the opening months of the pension reforms, Money Marketing can reveal. A Freedom of Information request submitted by Money Marketing shows the FOS has received 232 enquiries relating to the Government’s pension freedoms since they were introduced in April. […]


Divine intervention? Liability concerns could see Sipp providers overrule transfer advice

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Advisers are adopting what has been dubbed a “fear-based” advice charging model as the thorny issue of insistent clients rumbles on. The FCA published a factsheet on dealing with clients who want to act against a recommendation in the summer. But despite regulatory assurances that firms can deal with insistent clients if they follow normal suitability processes, […]


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There are 7 comments at the moment, we would love to hear your opinion too.

  1. Transparent really when you think about it.

    George want people to cash in their annuities and trash their pensions, not to mention invest in flaky crowd funding, but the regulator has been wary and (rightly) put the brake on. Advisers too have been cautious, as they don’t want to get clobbered by the regulator. All this has rather frustrated Boy George.

    What he wants is a poodle, but I wonder if this Swiss guy will roll over for him. From what I know of the Swiss, if you think the Regulator has been cautious up to now – watch this space!

  2. You ain’t seen anything yet…..
    Just wait until we see a massive tsunami of new Complaints rushing towards all advisers as the Complaints Management Companies (CMCs) move on from PPI, and actively encourage everyone and anyone who was ever sold ‘any investment, any ISA, or any Pension Plan’ to complain and get ‘free compensation’.
    The cost to adviser firms of defending all complaints in line with the FCA rules is significant, and very time consuming, even when the ‘claim’ may be a vexatious and a meritless ‘try-on’.
    CMCs regularly ignore all adviser responses, and simply send the complaint directly to FOS as a free of charge clearing house, that we pay for.
    Some FOS adjudicators are ill-equiped, inexperienced, and do not have the qualifications that many advisers have, and this is particularly true of pension complaints where there are many ‘technicalities’ that can have a material effect on the suitability or otherwise of the advice given.

  3. I don’t think anybody would not welcome some relaxation of regulation but with the caveat that the regulated can be ‘trusted’. It is almost 28 years since regulation commenced yet the one glaring omission (for me) has been educational standards. It took until 1996 for FIMBRA to insist on the FPC and 2013 for the FCA to require QCF level 4. Are these adequate qualifications today for a sector as complex as it is? If QCF level 6 was the minimum requirement wouldn’t a lot of the problems or at least fears go away? You don’t hear of the accountants or solicitors regulatory bodies interfering in their members businesses the way the FCA does. Why? I would suggest because of the qualification standards, with competence almost always assured. Regulation has been too much about micro managing ‘monkeys’ to be able to perform brain surgery instead of training up people to become brain surgeons. Very few of us like taking exams but even for the experienced adviser there is still much to gain from study. In the world we now live in surely everyday is a school day!

  4. @ Duncan 1.43pm. This will not improve end results for investors for the vast majority of IFA- advised purchases or client action upon advice. You only need to see the FOS stats to see how well advisers perform already in terms of doing a good job for our clients (i.e. the tiny amount of the overall claims and the even lower uphold rates). So I would disagree about the extra qualifications being needed. Qualifications are not the be all and end all by any stretch of the imagination. The huge majority of advisers haven in the business for many, many years and do not NEED any more “qualies”. Their experience, knowledge and skills of doing this job is of far more use to clients than taking more exams.
    What we need is smart, effective common sense and focused regulation. The only way that will happen is by the FCA being split into smaller units specialising in specific areas and having knowledgable staff who are experienced their relevant areas. This shoe-horning broad brush approach as a catch-all does not and has never worked. So for instance a Unit dealing solely with and making rules for only financial advisers, one for banks, another for providers/asset managers etc. What is deemed good for the larger organisations is not necessarily good for IFA/RA market and vice versa. Only then will we get some kind of meaningful relationships with the regulator and we can then have confidence in the Regulator and those in the regulator will see just how good we actually are in what we do.
    Will it happen? I doubt it but its on my wish list and we can only hope

  5. The regulators failed to regulate the banks and look where it led us. It was the incompetence of the regulators and the so called light touch regulation that allowed bankers to destroy their banks through greed, ignorance and arrogant stupidity. Principles are fine for principled people but bankers need the iron rod of regulation to come into line.

  6. Let us not forget also that the regulators failed to regulate advice on unregulated investments and look at the skyrocketing FSCS levies that that’s produced for (the rest of) us.

  7. Only the FCA could dream up the line that although the product is unregulated, the advice leading to it is regulated and therefore the adviser is held responsible. What a ridiculous statement however it does give them Carte Balanche to put the blame on advisers for just about anything.

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