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Report demands cultural change at FCA and PRA


A report has accused the two leading British financial regulators of a lack of transparency and “group-think.”

The study by Cass Business School and the New City Agenda think tank argues that cultural issues at the FCA and Prudential Regulation Authority must be addressed by politicians and that “unless we change the culture of regulators we will be sleep walking into the next financial crisis.”

The report says: “There is a clear and present danger that we will repeat the mistakes of history. Much needed change is already being watered down. The attention of politicians has moved on.”

“Regulators need to redouble their efforts to change their culture and move away from the bureaucratic and ineffective approaches of the past.”

The report also hits out at an apparent six-fold increase in regulators’ administrative costs since 2000, which now stand at £1.2bn a year.

The authors argue that a culture of “box-ticking” imposes additional costs on smaller firms.

The report says: “A deep seated culture of box-ticking had developed in the UK’s financial regulators. Instead of concentrating on the big issues, regulators spent valuable time adding ever more detailed rules and procedures and giving consumers ever more complicated information. This is likely to increase confusion and cost rather than establish clarity.”

“Complexity and box-ticking benefit lawyers and gives a veneer of reassurance, but it increases costs and makes regulations more difficult to understand and enforce and easier to manipulate or avoid. It also distorts competition. Big firms have armies of officials and a close relationship with the regulators to help navigate this complexity. Smaller firms and new entrants often find themselves reeling from the complexity, with only a call centre at the regulator to help them out.”



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

  1. I am reminded of the replacement for Rory Percival – someone who has been out of the world of IFAs for years, has probably never had to do a GABRIEL Return or worked in the post RDR environment and in an era where Government meddling has left us reeling. Furthermore, wedded to the old cultures and way of thinking…..

  2. Nicholas Pleasure 25th October 2016 at 9:44 am

    Absolutely correct.

    The main problem with regulators is that they investigate everyone, the good and the bad, as though they are guilty. This had led to a very risk adverse culture, especially with things such as anti-money laundering, which we all know is an utter waste of time in 99.9% of cases and often restricts access to services for older people and the less well off.

    Imagine how much the police would cost and how inefficient they would be if they investigated everyone as though they were guilty and forced them to constantly complete a paper trail to prove their innocence.

    How about if they asked each household to complete a return that showed their activity over the past six months o the police could discover whether there was an criminality. Do you think that such a scheme would cause the honest extra time and effort whilst allowing the dishonest to simply lie?

    Regulation needs to become much less about micro-managing businesses and much more about catching the bad guys. At the moment we have the worst of all worlds; loads of added expense and meddling with the crooks laughing whilst the good pay for their misdemeanours.

  3. Much needed change is already being watered down ~ exactly, as seen with the positively bowdlerised Mk.II version of the Statutory Code of Practice For Regulators. Not that the Code has ever made a scrap of difference to UK FS regulation anyway, because the FCA, like the FSA before it completely ignores it and no independent body exists to enforce it. Are the authors of this latest report even aware of the Code and that it’s supposed to constitute the template for good regulation?

  4. The FCA, and the people who are in it, are sticks of rock ! snap them in half and you will have the letters FSA running right though the middle of it and with every bite you take !

    Those who believe in Karma, the FCA should think on this; Karma is not a menu, you get served, exactly what you deserve.

    We don’t get the regulator we deserve, the regulator gets the industry it deserves.

    Oh the irony, of it all; lets face it, if they did their job properly they would all be out of work !

  5. Why does the news of this report not surprise me. Whilst the regulator has consistently moaned about poor advice practices and box-ticking, they have managed to change little of the culture.

    If box-ticking is prevalent within the FCA, it is no surprise that box-ticking processes are prevalent in circa 80% of advice given and yet the FCA’s own thematic review says that a third of investment advice is bad and another third cannot be proved to be good for the investor. It is plainly obvious that box-ticking does not work neither for the FCA nor for the delivery of good financial advice and the interests of the consumer.

  6. You may as well ask for a cultural change at the Civil Service. Bureaucrats have a culture of their own. They and the bright young things that are seconded through the revolving door with the big four accountants live in their own bubble as perceived (by them) as masters of the universe.
    Until the regulator is populated by people who have been in the real world – not only experienced practitioners, but those in other industries and fields who have demonstrated expertise – the culture won’t really be shifted at all. But in essence Cass is right. But like so much else the report will end up as a convenient door stop in some bureaucrat’s office.

  7. Quasimodo has got more chance of getting a love bite on his neck from Esmerelda than a change like this in the FCA happening. They don’t think they need to change and as nobody has the statutory power to do so, it simply won’t happen.

  8. totally agree with both previous comments and also the conclusions drawn in the article. the amount of time effort resources and money that goes into protecting ourself from our own advice is not to the benefit of customers. the costs are passed on to them and they are also presented with reams of unhelpful documentation which the vast majority never look at again. we have a bad regulator with a bad culture of assuming guilt. awful for customers and destructive of advisers job satisfaction.

  9. I’m not usually one for surveys and ‘think-tanks,’ but I have to say this research has squarely hit the nail on the head. Well done….But it is just a survey, so it will no doubt sit in the same wastebin as the proposals put forward by the community in respect of the FAMR

  10. Record the meetings and you can prove what was discussed (KYC) what was advised and why and what you and the consumer were trying to achieve. a suitability report proves NOTHING.
    Yes recording will also prove that you cannot cover everything even in a 2 hour client meeting,but if an prove you provided the client with all the information required of you and explained and focused on the priorities within the time the client allowed you and was wiling to pay for.
    Clients can have us spend the whole week with them should they wish and want to pay for it, but understandably none want to but bearing in mind jut one level 4 exam (say R04 pensions) requires 50 hours study time and we are supposed to condense all that knowledge in to a one hour session with a client, we all know we can only prioritize and demonstrate intent of our advice to match need with solution, not full understanding of the consumer of how the solution meets the need.

  11. Observed client meetings used to have a list of mandatory things to be covered (tick box) and other non mandatory, but over the years, everything has become mandatory (tick box) when actually the more mandatory, the more likely a breach of a rule becomes.
    I used to volunteer for the videoed role plays so I could wind he trainers up and prove to them it was actually impossible to pass a n observed meeting without boring a client to death as invariably they trainers would ask you to skip forward and it would still take longer than any consumer would be willing to sit and hear you cover mandatory points.
    If F-pack and FOS staff have not advised since post RDR, they can’t have a clue on what it involved anymore and most will have been failed advisers or one off salesmen who never carried out regular ongoing client reviews over decades as they saw financial services as a ladder to climb rather than a vocational service to clients.
    Even Rory Percival wasn’t an adviser for very long and nor was David Geale if you look at his CV.

  12. One big problem with recording meetings Phil – you cannot plan listening to recordings! In the end you make file notes to summarise meeting to confirm each others understanding which you can use to reference during the planning stages. Recording conversations and meetings are not easy to drop in on to extract key information which is why I dislike the idea of recording phone calls – and the expense for a perceived problem.g which in 100 of man years of advising has never been a problem.
    I liken FCA regulation to insisting we do 20 MPH outside schools outside term time. Unnecessary but simple to impose.

    • Hi Sam – actually they are easy to do that as you’ll usually have a pretty good idea wheat was said roughly were in a conversation and you simply jum forward and back until you find it. In addition, you can write a timeline (as we do if we listen to teh recording afterwards) of what was said and when and then put that in the file too so you can refer back to it later.
      Jane Hodges at Alexander House uses even better software which picks up key words and can allow you to go to certain sections.

  13. At last an independent report echoing what we the regulated have been screaming for years. Lets hope someone with the ability to do something is listening, otherwise whats the point?

  14. Sadly we live in a world were these chellenges are unfortunatly firmly embedded within nearly every industry. It is a pandemic, born from Government interference, by ministers who have never worked within the industry and believe they no better.

    I have no doubt that the consumer will keep on being protected from their poor decisions. It will continue until the system crashes down, at this point the minsters will be paid to find out what went wrong. This cycle has been repeated for decades.

    The only solution is one professional body, with legal representation for financial advisers, one able to bring us together, weed out the bad eggs, help, instruct, structure, challenge the system and regulator. Together we have strength, a say, a means to challenge, divided we have nothing. How many trade bodies do we have, CII, PFS, IFS, FS and the list goes on. Then add a regulator that has diplomatic immunity and you have the perfect storm.

    I have a dream, but the nightmare will continue way past my retirement as no one wishes to really tackle the major issues and the trade bodies are to busy trying to out bid each other.

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