News & Views

FCA consultations, is this any way to run a ballroom 2?

Regulation news for Financial Advisers and Paraplanners

9 Jan 2020

FCA consultations, is this any way to run a ballroom 2?

Last month we made available for all to see the results of an FOI request to the FCA relating to consultations. Our worst fears were realised when we eventually got a reply.

It confirmed what it would seem many held as a shared view. 

If some 93,000 regulated firms across the spectrum can manage to muster an average, based on my FOI reply, of some 45.6 respondents per consultation, what hope is there for firms to engage with any FCA consultation if those responding feel there is not some very real input to shape positive outcomes that is listened to. 

How do we know that?

Over the last six weeks we ran a survey to find out how worthwhile these consultations are in the eye of advisers.

The findings show a very sad state of affairs. To be fair, the response data is based on the last 5 consultations this year. I did ask: “would confirm the number of consultations carried out from 31 August 2018 to the 1st Sept 2019.  The size of the audience involved and in addition I would like to know the total number of respondents in that year and the average number per consultation?” 

The reply I got started to ring the alarm bells. My view, perhaps even fear is that very few firms engage with a process that is considered broken

“Your request has now been considered.  The FCA has carried out 39 consultations during the period in question.  However, we estimate that to comply with the rest of your enquiry would exceed the appropriate limit for complying with a request made under the Act, as set out in the Freedom of Information and Data Protection (Appropriate Limit and Fees) Regulations 2004.  Therefore, for the reasons outlined in Annex A below, section 12 (cost of compliance exceeds appropriate limit) of the Act applies. 

To date we have had over 203 respondents, 4.5 times that of the FCA average numbers for the last five consultations we requested information on. 

The outcome (that 'FCA-speak' term used instead of results or findings) follows. That word should really be a synonym of outcome, an after-effect, aftermath, consequence as the real findings of our research is that firms do not engage with the FCA as they do not trust the process of consultation one bit, additionally, they are scared to consult in case retribution rains down if the firms contribution is not on message.

Here are the questions we asked along with a selection of quite detailed observations.

 1.     Were you aware of any FCA consultation papers being undertaken in 2019? The majority said yes at 83%

  • Too busy complying with regulations to have time to respond and nobody ever listens anyway; just saying!
  • Most are sent to our network who deal with them.
  • Review of adviser fees in relation to defined benefits transfer- contingency charges possibly been remove
  • I have not received any invites to take part and am registered on the FCA register as an advisor
  • I didn't take part in them as I couldn't see the point.
  • Receive various FCA communications & emails throughout the year but can't see any about consultations.

 2.     Did you or your firm respond to any FCA consultation papers in 2019? 78% did not see it worthwhile to respond. 

  • It is a procedural gambit to show the world the FCA are listening.
  • Started to respond to 19-25 but views only sought on pre-determined areas. So much more to say but it would not have been considered
  • Most had an underlying taste of 'they have already decided' so what’s the point
  • like electoral constituencies with majority - impossible to change
  • as previous answer
  • through submissions to PIMFA, Libertatem and PFS
  • They don't take any notice of the respondents or our concerns - as evidenced with the cavalier dismissal of the very really PI crisis they created by increasing the FOS award limit on a whim
  • I was going to respond after CP19/25 but then thought it would be better if I kept my thoughts to myself to avoid getting into trouble!

 3.     Have you seen the outcome of the consultation papers you contributed to? Only 20% reckoned they had. 

  • Too much gibberish 
  • The outcome bore little relation to the data we had supplied
  • I glaze over this bullsh*t unless it’s important
  • I've sort of given up on the consultation papers and results.  Just jobs for the boys in my view 

4.     If yes, did the consultation outcome make you feel the time taken was worth the effort? 2.5% said yes. 

they have usually got their minds made up in advance

  • The 'analysis' was very low-grade, subjective and misleading
  • There is little confidence that the FCA will either do something about it or really understand what they are doing in the first place.
  • they never listen
  • The FCA seem to only take on board what they want to hear, and what outcomes they want
  • Having completed numerous responses over the years I have stopped completing them as there is never any positive change to their proposals. Your article it very accurate as to the reasons why not to bother.

5.     If you have contributed in the past to any consultation papers, did you feel that the outcome was already decided? 63% said yes. 

  • I felt that the outcome was already decided, so that was why I didn't contribute in the past
  • I think that the IFA community has not been listened to for many years and I don’t see it changing unfortunately
  • Think the FCA know what they want to do and may tweak it a little based on the feedback from the paper
  • I believe that consultation is about justifying the decision already made
  • Let's get real here, decisions are made long before surveys are sent out.! Pointless exercise(s)
  • They are merely going through the process of consultation. the questions posed are designed to focus on what they want. there is little if any opportunity to offer comments on anything not in the script
  • There were seven possible outcomes identifiable, and it felt as if we were being shoehorned into three of them
  • I haven't contributed to a consultation but have done work on Section 166 reviews and in many cases found that the outcome was predetermined or that the company that made the initial mistake was in charge of the review giving feedback to the FCA. This of course is massive conflict of interest 
  • A complete waste of time - just a box ticking exercise on the part of the FCA

 6.   Would you be more likely to take part in a consultation if it was overseen and executed by an independent third party? Of great concern is that 76% said yes.

  • As long as they were truly independent
  • Yes, must be completely independent - not just an FCA questionnaire facilitated by a 3rd party
  • Have some trust that it may be worth doing
  • If independent really is just that.! (See the 'independent' review of the HMRC Loan Charge for a recent example of something which obviously IS NOT INDEPENDENT!)
  • As long as that party was truly independent and also able to comment publicly on what FCA then does after the consultation 
  • They should be sent to registered individuals not just CF1s
  • No point
  • Independence is not a guarantee of better outcomes - people need to be trained to interact with the data competently
  • Depends on who staffs and runs the 3rd party - FCA in another guise (pointless) or accountable body or judiciary (good)?
  • I would be more likely to take part in a consultation if I thought the FCA were in any way interested in what we had to say.

 7.     Do you think the process of consultation should change? Even worse is that 80.5% say the process should change.

  • Encourage anonymous participation 
  • It would also be useful if the FCA used plain and simple language, as they insist that all IFA's use in suitability letters.
  • Clearly, because the present system does not work.
  • should include focus groups etc
  • More and clear announcements of the consultation and give respondents more time to respond
  • Most consultations that I have seen have been so broad as to be ineffectual or so focused that they will not consider broader views
  • By way of a genuinely independent group inclusion all interests and each with an equal say
  • No point to current system when they just say "we are going ahead as planned as we believe we are right"
  • The FCA should set the scenario and let an independent third party do the review to try and avoid any biases
  • Should be able to respond to consultations more quickly - they are too formatted and require input everywhere while you may only have relevant feedback on certain points
  • If consultation takes place decisions should be made by industry people not pen pushers at the FCA
  • Based on your data it's clear that firms are not engaging with the process - so something else needs to be tried.
  • What evidence is there that an independent body would be listened to? My belief is that the FCA direction of travel would continue regardless.
  • The word "consultation" does literally mean "to consult" - not "to make arbitrary decisions without considering the industry".

 8.     Should FCA rules or regulatory structure change without a minimum number of responses being received? It seems that numbers do matter. 59% say regulation and rules should not change unless there are significant numbers who have contributed. 

  • How many more poor DB transfers will take place while the regulator follows its process
  • There should be at least 40% return of respondents or they extend the time period and ask for more respondents
  • Not totally they fault that companies don't respond
  • Absence of evidence is not evidence of absence - if consultation periods don't attract response, surely the first question must be "are we asking the right question?"
  • It depends on the rule change being made. It seems as though rules changes are currently made without regard to consultation feedback such as the PI issue.  Majority of regulated individuals see consultations as a waste of time, they are embraced if they can act as a rubber stamp of approval or dismissed if they don't meet the FCA's own view.
  • Given that the FCA is acting without a broad range of feedback from a significant number of sources that are in themselves experienced practitioners, what confidence can we have that they know what they are talking about?
  • Ideally - but in the real world the FCA plays to the lowest common denominator and will act as they see fit. 

So, not a ten from Len. Time to think again, to quote the wonderfully irreverent ‘Derek and Clive’….is this any way to run a ballroom?

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