It seems it was only a short while ago that I sat in a Barbican conference room as the FSA explained what would be happening in the change over from FSA to FCA.
I recall sitting on the receiving end of lectures the thrust of which were that the consumer no longer trusted the financial services sector and that consumer detriment, running into some £500m per year, needed to be addressed by more effective regulation. This more effective regulation by the way itself costing some £500m per year.
I remember thinking, but not being brave enough to say out loud, what if we got rid of the regulator entirely. Would that not save £500m of consumer cost and probably not result in any greater consumer detriment? I am sure that I would have been firmly put in my place for saying such a thing but I do more and more think perhaps it is not such a crazy idea. You see I actually think that despite the naysayers most IFAs understand that consumers do trust them. They tend to have, in the main long and lasting relationships built on trust.
If the FSA, FOS, FSCS and indeed my friends at MAS did not exist, would I behave any differently? The answer is a resounding “no” I would still want to “know my customer” to ensure that any advice I gave them was “suitable” I would still want to make sure that I communicated well with them, in plain understandable English.
As we do today I would want to put great emphasis on explaining the “risk” of any product to be purchased or recommended course of action. None of those things would change at all. In fact I might argue that I would actually get better at it because rather than a lot of this stuff being lost in a “paper fog” I might be able to produce much more meaningful executive summaries that the client would have a fighting chance of actually reading and understanding.
Would I change the business approach I have of having multiple pairs of eyes consider each piece of advice that is provided to client? No, that would not change. Would we continue to do CPD and gain higher levels of qualifications? Again none of that would change at all. If a client had a complaint about our advice or service would I reject them out of hand simply because there was no regulatory comeback? Absolutely not, they would be treated exactly the way we do now on those incredibly rare occasions where they express dissatisfaction.
Would our business systems and controls be any different to the ones we work with today? I don’t think they would at all. We would still want to be capitally strong. We would still want to have in place the prudent and sensible insurance coverage that are currently required.
Our pricing model would not change either. We would still want to be great value for money. We would still want to be entirely transparent in the way we charge and the way that our client’s financial products are charged. I honestly don’t think we would change at all if we no longer had the regulatory world that we currently have.
I reckon that this is absolutely true for the vast majority of the IFAs that I know. They run client centric businesses that can be described as “professional practices”. They fully understand that a client treated well, advised in a suitable fashion and communicated with in an understandable and regular fashion is the single most valuable business asset that they have.
The regulatory world needs to recognise that this describes by far and away the vast majority of IFA individuals and firms.
Now do I think for one moment that the regulatory world will agree with me that they are not needed? No, of course not but I believe I have a better alternative. A very simple set of rules is needed about what constitutes acceptable behaviour (the current regulatory environment is simply too complex and too expensive) and this should be regulated by peer review. Does that sound like self-regulation? If it does I will sign up for it immediately.
Nick Bamford is executive director of Informed Choice