The year since the Financial Conduct Authority came into existence has been a busy one. In that time, we have looked to reshape the regulatory relationship with industry by focusing on a new way of engaging, acknowledging where we can provide clarity around our expectations, and having honest conversations when we see behaviours or practices that do not meet these expectations.
This change has been driven by the need to place consumers at the heart of the way we work – both firms and the regulator alike. I do not subscribe to the view that the regulator and the industry must be locked in perpetual conflict. It’s simple: for us to be effective, we need to work with industry to help deliver what consumers need and should expect.
With such a strong consumer focus, in the first 12 months this has inevitably meant particular attention on the advisory market. And, as our recent business plan makes clear, that attention will remain as the industry adapts to the RDR.
Our work in the advisory market is an interesting example because it is an area where we have reached out to industry, listened when we have not been clear, and changed our approach to provide further clarity. It is also an area where we have needed to provide some firms with honest feedback.
For example, the recent thematic work on how firms are using the independent label showed that most appeared to be getting it right. We did, however, recognise from speaking to industry that there remained some who were unsure of what the rules meant for them.
With this feedback we provided some targeted interventions to ensure that our expectations were clear.
All of this work has been underpinned by a better conversation with industry – directly with firms and with representative trade bodies. Our ability to explain to those working in the market what our expectations are is dependent on us having a strong working relationship with those we regulate.
In the first 12 months we have, I believe, made great strides in this area but I know there is more to do and we will continue to engage, listen and adapt our approach if needed.
There are times when we have been clear and, to some extent, industry has not engaged. The recent thematic review into disclosure is one of these instances.
Almost three-quarters of firms were found to have not been sufficiently clear when describing their charges to clients.
This was despite almost a year passing since the RDR came into place, what we believe to be the straightforward nature of the rules themselves, and the support we’ve offered firms.
We are working hard to make ourselves available and to be clear, so the intention of our regulation is understood by all. That is vital not just for you but also for the millions of consumers you serve. For that to work, however, firms also need to listen, adapt and meet the new requirements.
Achieving a collaborative approach to regulation is important if we are to place consumers at the heart of the way we all work.
We know this can be achieved through a better engagement model, with each side actively listening to the other.
Naturally we won’t always agree, but the advisory market is an example of how a collaborative approach works. It has shown that together, the regulator and industry can make improvements.
After setting out our stall in the first year, the next 12 months will be crucial to us working together and making these changes.
Martin Wheatley is chief executive of the Financial Conduct Authority