Take the FSA’s long overdue initiative of visiting and engaging with small firms. Around 30 per cent – over 6,000 firms – are included in its programme but this process is likely to take many more months to complete.
By now, it should be fairly easy to determine common themes and communicate them back to the industry. Surely it would be better to give an up-to-date opinion of any areas that are found to be of concern, so that problems are dealt with sooner rather than later?
The FSA has regular contact with the Association of Professional Compliance Consultants, so has missed an opportunity to give feedback on problems as they start to develop rather than when they have become widespread.
The scale of the programme means we are going to have to wait a long time for the results. I would prefer to see some data released now.
The FSA also needs to look at preventative measures to tackle problems that we know exist right now. It never ceases to amaze me how long it takes for the regulator to cotton on to the potential downside of some issues. This was the case with split-caps, selling sub-prime mortgages to prime borrowers, single-premium payment protection insurance and so on.
The FSA needs to be closer to the financial community and to take action more promptly. Getting out and visiting firms is the first step and is long overdue.
Spotting the obvious is also essential. We are now seeing mortgage brokers unable to find affordable remortgages or any remortgages at all for clients coming out of cheap products. In such cases, often because there is no ability to earn a fee, the adviser will proffer no advice and leave the client still needing a solution to their rapidly unaffordable borrowings.
This is where treating customers fairly comes into its own and advisers should be aware of their responsibilities. Even for clients who have moved into a dire financial situation, the adviser should still look at a referral to a debt management solution. Failure to do so may lead to future claims from people who have lost out.
I can see future professional indemnity insurance claims against brokers in these circumstances and fully expect the FSA to impose wider TCF responsibilities, sometimes retrospectively.
Another area due for extra attention is financial education. There is no doubt that our understanding of finance and financial products has been deficient. Spiralling credit card debts and mortgage arrears testify to this but, for me, the most sensible course of action is for the FSA to look at how financial matters are taught in schools and draw up a long-term plan to rectify the deficiencies. It will take at least a generation to reverse the downward trend in consumer education, so radical action is needed now.
Under the Financial Services and Markets Act, the FSA has four statutory objectives, one of which is to promote public understanding of the financial system. Few will argue that this objective has been met. A combination of funding issues and responding to short-term political demands mean addressing financial education is always going to be way down the list of priorities.
But if Turner really wants to leave a long-term legacy, he needs to help the FSA set a long-term strategy to tackle this gap in understanding and education. If he does, the nation will thank him one day.
Gary Dixon is managing director for financial services at Resources Compliance