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NAO launches FCA value for money investigation


The Prudential Regulation Authority and the Financial Conduct Authority are being investigated by the National Audit Office over whether their regulation is proportionate and whether they provide value for money.

The new so-called “twin peaks” regulatory structure was introduced by the Financial Services Act 2012 and requires an annual NAO review of the regulators.

However, this separate investigation has been requested by the NAO’s comptroller and auditor general.

The resulting report is expected in 2014 and is likely to trigger Parliamentary hearings by the powerful public accounts committee.

An NAO spokeswoman says: “This study will examine the regulatory framework and approach, providing an early assessment on whether regulation in likely to be delivered in a targeted, proportionate, consistent and transparent way, and whether the bodies are effectively working together.

“It will also consider the impact of the changes, both in terms of the additional costs of the regulators and, where possible, through estimates of the additional costs and benefits to regulated firms and consumers.”

During the legislative process which replaced the FSA with the PRA and the FCA, MPs and peers raised concerns about the potential for increased regulatory costs and double charging.

The regulators co-ordinate through cross membership of boards and committees and through memoranda of understanding. MPs have raised concerns that these processes would be inadequate.


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There are 15 comments at the moment, we would love to hear your opinion too.

  1. We all need to send feedback and opinions to the NAO

  2. Becoming a headcase IFA 1st August 2013 at 12:27 pm

    “It will also consider the impact of the changes, both in terms of the additional costs of the regulators and, where possible, through estimates of the additional costs and benefits to regulated firms and consumers.”

    What benefits to firms and consumers?

  3. This will either be a whitewash or they’ll tell the truth and point out the existing regulatory structure is unsustainable with costs totally disproportionate against benefits to the consumer at large. They should also raise the issue of sustainability against the backdrop of falling adviser/firm numbers and where the likes of 16% regulatory costs will come from in the future?
    Do they really need a review to know this because all the evidence and mutterings from the heads of the FCA demonstrate quite clearly these people are not up to the job?

  4. Maybe finally here is a chance to get SOMEONE to listen to us? The NAO need to receive a tsunami of feedback that identifes that within our specific sector we are overburdened, unable to provide advice simply, have to charge consumers way more than we otherwise would, have to spend hours within each client case on pointless stuff, let alone the time spent reporting utterly irrelevant data to them twice a year, AND that all these rules have achieved relatively little in terms of stopping real problems.
    AND get clients to let them know as well that they dont like having to pay £500 for advice we could do for £150.
    EVERYONE, do this, finally maybe theres a chance of change for the good…but it might be the last chance so lets not waste it. The worst thing woudl be that in 2 years time the regulator can say that the NAO didnt hear anything from IFAs or their clients.

  5. Take the High Road 1st August 2013 at 12:43 pm

    good news…perhaps they can start by asking the head of the FCA(Mr Wheatley) what exactly he means by coming out with additional statements recently relating to RDR and something he described as ‘dealing bias’…..which seemed most bizarre altogether….what precisely are these people being paid to do, regulate sensibly or just make it up as they go along to justify their seemingly worthless existance!?

  6. If it takes the NAO longer than 10 minutes to discover that the regulator is neither proportionate nor value for money, then they themselves are somewhat lacking. (To be polite)
    And when they do discover this truth (shock, horror!), what will be the outcome? Another “We are independent – so bog off”

    Funny isn’t it that the Regulator is independent when it suits them and not if that meets their purpose.
    Just take the matter of fines. Why didn’t they tell Boy George to bog off? “We are independent of Government; therefore these fines are to be used within Financial Services – one way or another”. Was not something I heard. (There are other examples).

  7. @ Harry Katz 1.05 pm – Excellent comments Harry and Im with you 100% of the way on what you say. I too am very happy to hear this is happening but have 2 very big concerns. 1) How the NAO are going to get their information from to base any the report on (ie not just rely on the information/evidence the FCA give them or we are all doomed for eternity) and 2) what they can do about it if their report shows what we all know – the costs are totally out of control, unsustainable and it offers little or no beneift to industry/firms/consumers. So far the FSA/FCA has shown total contempt towrds other publically elected officials. My fear would be that the regulator comes back and withteh usual guff of we need to keep our costs at this level in real terms minimum if you want us to be able to do the job we have been set. We need “world class people so have to pay the salaries and benefits atthe levels we do… and so on and so on. It is however a start and here is hoping that some good comes out of it for all our sakes.

  8. “The FSA has done well in managing the merger from 11 regulatory bodies to become one of the world’s first unified financial services regulators. In doing so, it has created strong and effective structures.

    “But the challenge for the FSA is now to move to the next level. It must do more to demonstrate its impact; to get a clearer understanding of how much its different activities cost; and, crucially, to streamline its processes and advice, to benefit industry and consumers.”

    Sir John Bourn, 30 April 2007


    Five years after its creation the Financial Services Authority, the independent body regulating the financial services industry in the UK, is a well-established regulator with an impressive set of processes and structures to help tackle high-risk organisations and markets. It now needs to streamline and fully integrate these processes and structures, and increase its focus on demonstrating the actual outcomes it achieves for consumers and markets.

    Today’s National Audit Office report is the first assessment of the FSA’s performance. It covers five areas: performance management; working with other regulators; international influence and representation; financial crime; and financial capability. It was conducted at the invitation of HM Treasury under section 12 of the Financial Services and Markets Act 2000.

    The National Audit Office consulted a wide range of the FSA’s stakeholders. While concerns were expressed – for example, on the number of rules in the FSA Handbook, the implementation of principles-based regulation on the ground and the need for the FSA’s approach to reflect the actual experience of consumers – the majority of stakeholders had broadly positive views on the FSA’s performance in the five areas examined.

    The National Audit Office found:
    •On performance management – The FSA has developed and is developing useful tools to manage its performance in meeting its objectives in an economic and efficient way. It must now look to streamline and integrate these tools and also get a better grip on information on the cost of its activities.
    •On working with other UK regulators – The FSA has good and improving working relationships with other UK regulators. It should focus on working collaboratively with the Office of Fair Trading to promote strengths and avoid duplications in the promotion of competition and consumer protection.
    •On influencing and representation internationally – The FSA commits significant senior level resource to influencing international developments, where it is generally effective, but could sharpen up its communication to stakeholders about its strategy and contribution.
    •On financial crime – Combating financial crime has tended to receive less attention than other elements of the FSA’s responsibilities. But the FSA has recently restructured and enhanced its efforts. To make a success of this, it needs to review the assessments it makes of firms and the skills and training of its supervision teams.
    •On financial capability – The FSA is a world leader in its work on financial capability. It should build on this by focusing on the costs of low financial capability, setting measurable goals for its impact on consumers and developing with stakeholders its medium term strategy for financial capability beyond 2011.
    More of the same tosh this time round, no doubt.

  9. We all need to send feedback and opinions – but to where and to whom?

    Is this the usual IFA industry response ‘we are up in arms – we are really annoyed’ – did you do anything about it? – well no, but I put a nasty comment on a blog once.


    Under FCA regulations this is classed as advice if you could all please send a cheque for £250 made payable to Client Advisory Standards Helpline (please use the initial is that is easier) to:

    PO BOX 4Q
    Andyouaswell Street
    Tos Pain
    BY1 &ALL

  10. 1. Who has instigated this investigation?

    2. From whom exactly will the NAO seek representations that the FSA is and for many years has been anything but value for money?

    Will bodies such as the networks, national intermediary firms, trade representation bodies and providers be allowed their say?

    2. What action will the NAO take if, as is almost certain, a mountain of evidence emerges that the FSA does NOT represent VFM by any reasonable measure and is, in fact, a totally unaccountable and profligate monster?

    Are, for example, the lavish severance packages awarded to departing senior exec’s, such as 6 months fully paid gardening leave for the likes of Margaret Cole and Hector Sants, value for money?

    The FSA accorded itself free rein to turn the industry upside down and inside out with its wretched RDR (which, let us not forget, it almost scrapped ~ only Adair Turner’s casting vote prevented it) so now a third party should undertake a Benefits:Cost Analysis.

    We know from the original Cost:Benefits Analysis produced by the FSA in support of its RDR that that was nothing but a massive and mendacious understatement of the former and finger in the wind guesstimate of the latter. So only an entirely independent and genuinely disinterested third party can be trusted with the task.

    An organisation that writes to my MP stating that the FSA does abide by the provisions of the Statutory Code of Practice for Regulators (but without citing a single example) clearly cannot be trusted to tell the truth on anything.

    A good place to start might well be to turf out from 25 The Colonnade three quarters of the FSA’s staff and relocate them 50 miles away from what must be one of the most expensive areas of real estate in the country. They don’t need to be at Canary Wharf, any more than does the ICO (Wilmslow) or the NIC Office (Newcastle).

  11. RegulatorSaurusRex 1st August 2013 at 11:18 pm


    You must be ‘avin a larf Gove

  12. We know that the FIMBRA, the PIA and the FSA in both Mk.I and Mk.II guises has cost the industry billions of pounds, possibly tens of billions of pounds, in levies and compliance costs over the past 20+ years.

    How does the NAO (or anyone else) plan to quantify the benefits of those colossal costs? Was, for example, consumer detriment of £578.4m averted last year? Are ordinary people investing more into pension plans or saving into ISA’s or taking out (and sticking with) personal and family protection plans?

    Is public confidence in financial services greater or much less than it was 20 years ago? Are there 20,000 better financial advisers out here or just 20,000 less of them? Do those who remain feel better or worse about the state of the industry generally?

    Are the regulator and all its spin-offs held in higher or lower regard by both the public and by the industry than it was just 10 years ago?

    It’s hard to anticipate positive responses to any of these questions.

  13. Im sure NAO will look more broadly then just the regulation of investment advisers, the industry is far bigger than our little world and that may mean advice is somewhat overlooked. Im sure the exercise will focus on process and governance at a strategic level and therefore not produce the outcomes you all seem to want.

  14. Over the past 10 years the FSA has taken £3.632bn in fee income as well as a kings ransom in fines.

    Add to this the indirect cost on firms in terms of time spent complying, time spent designing/redesigning forms, time spent with accountancy changes caused by pen-pushing inadequates as well as a myriad of other peripheral expenses caused by/created by the usual suspects and you have the bottom line.

    Has it achieved anything viable….

    Has it increased the safety or satisfaction of the consumer….

  15. For those getting over-excited about what this might achieve it is worth considering the actual remit. It is not a ‘look back’ but a ‘look forward’. The three points they are looking at are:

    1. examine the new regulatory framework and approach, providing an early assessment on whether regulation is likely to be delivered in a targeted, proportionate, consistent and transparent way, and whether the bodies are effectively working together where this is necessary or beneficial;

    2. consider the impact of the changes, both in terms of the additional costs of the regulators and, where possible, through estimates of the additional costs and benefits to regulated firms and consumers;

    3. review the performance measurement system used by the new regulators.

    For those wishing to contribute the above points and contact details can be found here:

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