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.
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