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Nic Cicutti: My schizophrenic view of regulation


This may seem hard to imagine, given my overall approach to writing, but I’m generally bored by confessional journalism.

First-person writing, where a columnist expresses a viewpoint in the context of talking about him- or herself, is a technique often done to death – as readers will undoubtedly be eager to point out in the wake of my latest effort this week.

I’m also wary of people describing particular approaches to life as ‘schizophrenic’, another overdone word.Schizophrenia, according to definitions I’ve read, is characterised by a difficulty in telling the difference between what is real and what is not, which makes it difficult to act ‘normally’ in certain circumstances.

Sometimes, however, what is sometimes labelled as ‘schizophrenic’ is an entirely normal attempt to make sense of a set of conflicting realities. For example, trying to apply socially-taught expectations not to engage in violent behaviour to personal circumstances such as being attacked by a burglar in your own home.

But after reading a recent column by Phil Billingham in Money Marketing, where he describes himself and the rest of the IFA community as both schizophrenic and hypocritical on the subject of regulation, I couldn’t resist adding my own confessional viewpoint to the debate.

Yes, like Phil, I am probably also schizophrenic. I, too, have a set of conflicting views about regulation, some of which I would like to share with you.

But first, we should examine Phil’s own views, which raise some good points. And so they should: Phil, who runs a partnership of the same name, is a consultant in the elusive art of “assisting financial advisory and planning forms to thrive in periods of regulatory change”.

Fundamentally, his argument is that regulation is a necessary irritant that doesn’t really work in the way intended.

For example, he mentions the fact that we all tend to tick online boxes to say we have read and understood the terms and conditions of firms we do business with.

In reality, we haven’t, mostly because we don’t care or have little expectation that reading them would make any difference to the behaviour of those firms. Instead, we expect Amazon, Tesco and other big online firms to ‘do the right thing’ by us – and generally, with some glaring exceptions, they do.

The lesson for Phil is that if IFAs were to be treated as ‘trusted advisers’ by the regulator, “taking formal and legal fiduciary responsibility for our advice, with no need for caveat emptor, consumers would be better served and the cost of regulation on our firms would be lower – especially FSCS levies”.

The word Phil seems to feel is most important in the relationship between financial advisers and their clients is ‘trust’. If you could achieve that, the necessity for over-burdening regulation would be vastly reduced.

As it happens, I agree with him. If all advisers could be trusted, it would be far easier to offer light-touch regulation.

I also agree – and here is my own sense of schizophrenia coming out – that a large part of the regulatory set-up previously provided by the FSA did not work.

It was reactive and not proactive, it failed to catch the crooked and the incompetent in time, it could be overbearing and it sometimes failed to distinguish between the firms that were trustworthy and those that were not.

In that sense, I do understand some of Phil’s stated sense of schizophrenia, which he ascribes to many advisers: regulation may clearly be necessary, just not to them.

That said, I also think there are issues Phil needs to address. The most important is that regulation, while onerous, is there to ensure the consumer feels safe.

Taking his tick-box example, consumers skip reading T&Cs not only because they “trust” the retailer but also because they are aware, if only dimly, that there is a latticework of laws and regulations to protect them if things go wrong.

A trader is subject to the Sale & Supply of Goods Act 1994, which requires an item to be ‘of satisfactory quality’ in the eyes of a reasonable person and to be as described. Buyers are also covered by the Misrepresentation Act of 1967 and the Trade Descriptions Act of 1968.

If they buy an item that is faulty or it is not received, they can ask their credit card company to apply Section 75 of the Consumer Credit Act 1974 to obtain a refund of the purchase price. Moreover, if they buy something and change their mind, they have additional protection under the Consumer Protection (Distance Selling) Regulations 2000.

In other words: trust, yes, but qualified by whatever rules are necessary to engender that trust. Ironically, there are often more rules to protect consumers in the event of them buying a non-functioning CD player than there are for someone who is mis-sold a dodgy lifetime retirement plan.

Which is why, sadly, while it may be harsh on the majority of advisers who see themselves as unique in their blamelessness, I don’t see regulation being made lighter for them any time soon.  

Nic Cicutti can be contacted at



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There are 10 comments at the moment, we would love to hear your opinion too.

  1. “regulation, while onerous, is there to ensure the consumer feels safe.” Despite the claim from Tracey McDermott that the FCA doesn’t want to overburden small IFA’s with compliance, it [the FCA] has made and continues to make regulation, particularly for small intermediaries, onerous to an absurdly disproportionate degree. Apart from a relatively tiny number of shameful exceptions (just 1% of all complaints referred to the FOS, with only a 45% uphold rate), all the data and consumer surveys indicate unequivocally that IFA’s are the most trusted source of advice, both initial and ongoing.

    Yet, almost entirely due to the activities of many LARGE institutions and the litany of failures on the part of the FSA to regulate those institutions effectively BEFORE the damage has been done, consumers feel less safe then ever from the industry overall. Not less safe from small intermediaries but less safe from many of the large institutions.

    Do consumers have confidence in and feel protected by protected by the FCA and before it by the FSA? I submit that they do not and indeed they’re frequently bemused and in some cases downright irritated by the tonnage of paperwork that their advisers are compelled to produce to document even the simplest of transactions, the practical value of which is often, at best, highly questionable.

    Whatever happened to the risk-based, proportionate and targeted approach to regulatory inspection and enforcement enshrined in the Statutory (which means that it’s the Law) Code of Practice For Regulators, by which the FCA is supposedly bound to abide? Totally ignored, and this state of affairs will continue for as long as the FCA remains free to set and pursue its own agenda without the irksome inconvenience of accountability to any outside agency.

  2. Julian 10/10 as usual

    Whatever indeed BUT there have been one or two encouraging signs that the FCA is starting to listen

  3. If you’re not happy with the term Schizophrenia maybe Bi-Polar is more accurate.

  4. The industry gets the regulation it deserves. Whilst many people on here are probably decent, trustworthy advisors, the sad truth is that many are not. There have been some horrendous examples of consumers being ripped off in financial services and that where the regulator sets their position. Unfortunately for many, the regulator cannot assess everyone individually and therefore the lowest common denominator will be used to moderate the industry. Hopefully as the advice industry improves in both professionalism and transparency this will change and the regulator will reduce the burden on advice firms.

  5. Neil F Liversidge 24th October 2013 at 1:15 pm

    Nic writes, and I quote – “The most important is that regulation, while onerous, is there to ensure the consumer feels safe.” I disagree. Regulation is there to ensure the customer IS safe. There is a difference between BEING safe and merely feeling safe. The worrying thing is that the regulator does not seem to appreciate it either. The regulator seems to think that endless data gathering will ensure a safe environment. It won’t, because the real crooks will fake the data for long enough to complete whatever crookedness it is they’re engaged in. Meanwhile the rest of us are laden down with the FCA’s latest exercises in timewasting such as the ‘Online Regulatory Review’ which I have just been told I must complete. It’ll only take me two hours I’m told. Well that’s all right then. Only two hours when I could have been working for my paying clients to earn my living, or two hours when I could have been doing the bit of pro bono we do for the poor needy and desperate, or even two hours R&R riding my Harley or at home with the family. Time is cheap when it belongs to somebody else. Anyhow, back to feeling / being safe. It is a paradox but a fact that the safer people feel the more risk they take. Hence drivers wearing seatbelts take more risks than those without and hence I ride my Harley a damn sight more sedately when I ride it without a helmet. So it is with investors. The underpin of the FOS, FSCS and claims culture has led many to believe they can take any amount of risk and still come out smelling of roses by claiming misspelling. We need a ‘white list’ of regulated and compensatable products and services. Anyone choosing to go off list does it at their own risk. It wouldn’t be difficult but it would require the regulator to get off the fence it likes to sit on. Until it does consumers will FEEL as safe as the glib can make them believe they are, but we’ll still be writing top-up cheques two or three times a year for the FSCS.

  6. Oh Matthew ? your thinking has reminded me of my old sales managers favourite quote ” don’t tell me what you have done tell me what you are going to do”

    And a quote from an old pub landlord “free drinks tomorrow”

    Of course what we have done will never be good enough ? and as we all know tomorrow never comes.

    But we can only hope as your last sentence implies ?

  7. Do we get the regulation we deserve?

    I agree with Julian’s sentiment above entirely, but the fact is the sins of the few do unfortunate effect the good honest hard-working financial advisers.

    What I would like from the regulators is that they listen to the concerns of small IFA practices rather than listening to large multinationals. I forgotten how many times I’ve actually written articles or letters to old FSA or FCA on issues that I feel are of considerable detriment to clients.

    The problem with the current regulatory structure is it only catches about half of the activity that is actually going on within financial services. A good example of this is the mortgage market where residential mortgages are fully regulated and controlled and buy to let mortgages are not.

    If you’re going to have a regulator it needs to encompass everything and although you can still have light touch regulation with firms are proven their capabilities you also have to have the same rulebook enforced right across the industry. You cannot give one rule that is applied to banks and building societies and then another IFA’s, it may be the same rule but it’s certainly been interpretative differently and applied.

    If an IFA practice had done the level of miss-selling the banks and building societies have done would we be allowed carry on in business?

    The answer to that question is simply no.

    Financial services will not improve until regulators start to meet out the same level of punishments and if that means preventing a major organisation from carrying out further business in financial services so be it.

  8. I agree with Neil and Peter. Nuff said

  9. I’m deeply concerned by Neil Liversidge’s revelation that clients will be able to claim compensation in cases where there has been misspelling by their adviser.

    If ownly I’d payd more attenshion in Mr Bugden’s Inglish clas.

  10. This endless, and rather pointless, debate reminds me of one of those medieval ‘How many Angels can dance on the head of a pin?’ questions.

    BTW my answer of exactly eleventytwelve, whilst possibly inaccurate, is a least as good and answer as everyone else’s.

    Of course regulation isn’t going to get any lighter soon no matter how goodly (or badly) the regulated behave. It probably doesn’t work that well and the answer when this becomes manifestly obvious is for the regulators to get tougher and, usually, bigger.

    Regulators respond to the ‘something must be done’!’ agenda that is an almost constant bed fellow for private and public enterprise nowadays and I made that point in a lighthearted way in response to the original article.

    We’re stuck with it until the culture of at least some of the regulated, and most of the unregulated, changes and, paradoxically, that will never happen by pressure from without.

    Meanwhile I’m reminded of this:

    Like a circle in a spiral
    Like a wheel within a wheel
    Never ending or beginning
    On an ever spinning reel

    As the images unwind
    Like the circles
    That you find
    In the windmills of your mind !

    RIP Noel.

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