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Editor’s note: Advisers need to report the rogues in their midst

Each time an advice market scandal emerges, a flood of commentary inevitably follows bemoaning the fact it was not spotted sooner. Why did the regulator fail to act until after the horse had bolted?

At the Money Marketing Interactive conference earlier this month, the FCA’s co-director of financial advice and life insurance supervision Debbie Gupta had an answer to at least part of that question: financial planners are, as a rule, not proactive enough in telling the regulator when they have concerns.

But why aren’t they forthcoming? Cynically, you might say that many advisers take up their gripes with professional bodies like the Personal Finance Society or the Chartered Institute for Securities and Investment on first instance, which have the perverse incentive not to weed out the chaff in their ranks, given that doing so would sacrifice membership fees.

Others may fear that more negative headlines will only tarnish the reputation of advice as a whole even further, and that it doesn’t do well to only highlight the most egregious offenders in the industry.

Cover story: The state of adviser whistleblowing

More likely, it is that advisers do not trust the FCA to act on their whistleblowing reports. What is the point of putting together all my evidence on the dodgy “adviser” down the street if it’s just going to be ignored? But this is certainly not the case for all advisers, and I definitely hear the mood music improving.

We should not forget the enormous success stories of planners going above and beyond to root out the bad apples in their own ranks in recent times, like during the British Steel fiasco.

The FCA’s wider focus on whistleblowing procedures and increased satisfaction with the role of advisers as a whole post-RDR can only bode well for a healthier relationship to develop in future.

Trust works in two directions, as Gupta said, and advisers can’t have it both ways, complaining about filling in regulatory returns that can help identify harmful trends, while all the while turning a blind eye when they see obvious harm being caused by others.

At the end of the day, the FCA regulates 58,000 firms. Some whistleblowing reports will inevitably slip through the net. But that doesn’t mean we shouldn’t keep trying to highlight bad practice. This is the first step to the kind of effective self-regulation that is a feature of other professions.

Disciplinary organisations like the General Medical Council and Solicitors Disciplinary Tribunal, while imperfect, are well-known and respected within the professions themselves as governing bodies that you want to avoid at all costs.

The advice market’s own leaders should step up and follow suit by working closer with the regulator and their own professional bodies to ensure a more reliable chain of action the second practitioners spot emerging harms.

Justin Cash is editor of Money Marketing. Follow him on Twitter @Justin_Cash_1



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There are 3 comments at the moment, we would love to hear your opinion too.

  1. I’ve never identified any bad practices amongst my peers that I’ve felt should be reported to the regulator. But, if I did, having read SO MANY reports from others who have done so, only to find that NO ACTION was taken, I really don’t think I’d bother. What would be the point if such reports simply go into the same black hole as all the GABRIEL data?

    If the FCA sincerely wants to build trust with the adviser community (as opposed merely to claiming that it does, which is a very different thing), it should draw up, publish and then stick to a clear set of procedures so that advisers who identify bad practices they feel should be reported can examine and have confidence in just what will happen as a result. If they don’t have that confidence (which it is the regulator’s duty to instil) and/or see that set of procedures being ignored, they can decline to report and be quite open with anyone who asks why.

    The relationship between the adviser community and its regulator has a very long way to go before it can be reasonably described as a two way street and merely talking about it won’t, on its own, make it so.

  2. @Julian Stevens

    Yes, spot on. I reported a firm some years ago for serious breaches and as you say the FCA did nothing

  3. FWIW, my plumbing & heating engineer tells me that his trade’s regulatory body is just the same. On more than one occasion he’s reported blatantly bad practice, only for no action to be taken so, from now on, he plans simply not to bother.

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