The past five years has seen an upsurge in dismal comments about the regulatory imbalance that affects firms and advisers.
Some have harboured the notion that the imminent Financial Conduct Authority would provide greater balance and common sense than current and past regulators. Many hoped the changeover would also herald a new era of mutual respect and put an end to the antipathy that has catalogued the last decade.
Therefore, it was with a questioning mindset that I read Approach To Regulation, the recently published guide on how the FCA will deliver its objectives. Sadly, it did not take long for a wave of concern to wash over me. Surely, it cannot be me alone who finds it extraordinary that the new regulator, one created to repair the epic errors of the past regulatory failure, is being designed and then populated by the very body whose failures precipitated this situation.
The publication gets off to a bad start by dissembling in best RDR style stating that confidence in financial services is at a low level due to widespread misselling. Any rational commentator can state, hand on heart, that the swift removal of both bancassurance and regulator would solve most of the concerns.
Apparently, the FCA requires a considerable investment in resources and has aspirations to command the respect of consumers and regulated firms. We find fictional revisionism in play and learn that the FSA “intervened robustly” in the PPI debacle. This despite the reality that most of the industry was fully aware of and commenting on this problem many years before the FSA finally grasped the nettle.
The FCA will have six regulatory principles and one can perhaps forgive a rueful smile as we read of its “need to use its resources in the most efficient and economic way”. Another principle confirms “consumers should take responsibility for their decisions”. Now this will be a first because it is universally accepted that the principle of caveat emptor no longer applies to financial services where firms are considered guilty until proven otherwise and even then have to pay for the privilege of innocence.
The new body will also look to remove barriers to industry entry, although I imagine that scrapping the tortuous RDR experiment is not quite its intention. More worrying is the intention to involve the FCA in setting prices and deciding whether products offer consumers value for money. The FSA has conspicuously failed to recognise value and seems to promote commoditisation, a lack of acumen that bodes ill for the industry.
Now forgive the mirth, but the part that reads like a Blackadder script is where we are promised “the FCA will build on the FSA’s approach to consultation”. Now this may yet win a Golden Award at Montreux because the sham of consultation has succeeded in wasting millions of hours of advisers’ time and efforts where the ultimate result has been a replication of the original suggestions.
Finally, to highlight the relative importance, threequarters of a page is dedicated to the issue of accountability. As we know, and as commented on by the Treasury select committee earlier this year, the FSA is not accountable to anybody, in the round, and can do whatever it likes without the fear of intervention, sanction or legal consequences. We are promised that the FCA will be accountable to the Government and Parliament and that this will be achieved by the oversight of a Government-appointed board, by providing an annual report to the Government and some vague promises of independent reviews. So, no change there then.
Alan Lakey is partner at Highclere Financial Services