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As American as Mom, Apple Pie and Baseball

Panacea comment for Advisers

6 Aug 2013

Despite apple pie not being an American invention (the history of the good old apple pie goes back a very long way indeed) it is a phrase often heard to describe something that is unique to the culture and society you live and work in, illustrating principles or values with which few disagree.

They say that in democracies, the people get the governments they deserve. Is it now the case that in financial services, regulation has delivered the outcome consumers deserve?

The following were a selection of recent trade press headlines and I am fast beginning to despair about the image that this industry has. Who is responsible for that, does FCA regulation wish to see the death of the smaller adviser firm and in turn the demise of itself as nobody will be left to pay the fees?

            Martin Wheatley: Judgment-based regulation is here to stay

            Martin Wheatley: FCA is a 'very different animal'

            Wheatley: Structured products are like ‘spread bets on steroids’

            FCA chief Martin Wheatley warns of higher regulatory costs 

            MM Wheatley interview: Bad consumer outcomes will see RDR revisited

            FSA reveals its latest executive pay and bonuses

            Advisers need to project positive image

            Complaints Commissioner rebukes FSA for withholding information

AMI boss Robert Sinclair is on record as saying that “we need a new deal where the FCA commits to no more money.  We also need them to consider where they really should be directing their attention.  

The bad in the industry need to be removed but the time has come for the regulator to consider the impact of statements like those above on consumers and those they regulate, in particular small adviser businesses.

As Sinclair said “We need recognition that most intermediaries live in the communities they work in. They advise people they see at school, in their pub, at the sports club and in the supermarket every week.  They are not out to do bad things to their neighbours”.  

They do routinely act in the customers’ best interests.  We need a regulator who can incorporate that into their risk models and factor it into their work. Finally, we need a new contract where they operate within a constrained budget by really addressing the real risks, not imagined one’s”.

The UK financial services industry is unique to the culture and society we live and work in, and financial advisers in a post RDR world as well as the pre, continue to illustrate the very best of principles and values with which few disagree, few that is except the regulator?

It is time we as an industry shouted about it too. And it is high time the FCA realised that regulation does have a cost but that cost is in lost businesses, lost opportunity and lost consumer confidence.



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Comments (2)

Rob Sinclair is one of the wisest and soundest representatives of the adviser community, who deserves a much higher profile.
Much of what this piece says will ring true with many advisers.

The problem is that in spite of almost 30 years of regulation, there are still problems. 'Therein lies the rub'.

I think the regulator misunderstands two important points:

1. You will never attain 100% perfection.
2. Those in Regulation invariably (If they have any relevant experience at all - which is by no means a given) come from large organisations. There are far too many from the big 4 accountants, in addition to which far too much work is also outsourced to them.
This might be desirable when regulating big firms and banks, but when it comes to the smaller intermediary it is akin to using an Atomic bomb instead of a mousetrap. Remember that by numbers there are far more small firms (5 RIs and less) than any other.
That is not to say that small firms are perfect, but all the statistics (as well as this pertinent article) point to far fewer problems from this sector. The conclusion should mean a different regulatory approach with the much vaunted Regulatory Dividend in evidence and regulation operated by those with direct experience of the people they are regulating.

Harry Katz   12/08/2013   09:09
As Harry says, 30 years of regulation. Some good results:

1 life assurance provision by the public is at an all time low, in spite of rates being the lowest ever (and I've yet to meet a widow who doesn't believe in life insurance!)

2 general pension provision is hopelessly inadequate unless one works in the public sector - interest rates sparked by the worst financial crash since the 1930s (and on the FSA's watch) only exacerbate the situation.

3 Equitable Life, Independent, several insurers ported in gone bust.

BUT there are positives:

1 the regulators with various names over the same door have taught how to tick boxes and how to suck eggs on matters such as TCF!! :-) I'm sure that none of us knew about TCF before that acronym found its way into the rule book and we should be very grateful for it. Whoever thought of it must have a first class honours degree in the bleeding obvious.

2 those nasty IFAs with 30+ years' experience and no complaints against them but no level 4 qualification didn't receive grandfathering rights and many of them retired. After all, you never know what claims could be against them if SueTheBs (ambulance chasers) succeed in winding up an unsuspecting public.

3 thank God that the widow's mite now can't receive proper advice, because she can't afford it any more now that we have to charge fees. After all, does she deserve any better?

4 no long stop: how unfair that IFAs should expect to be treated like every other profession. Isn't it only right and fair that some retired IFA should be pursued long after records have disappeared and be found lacking because he/she can't prove otherwise? Sooner or later this will happen to an elderly former member of the profession with Alzheimer's disease and his family will be made destitute. Serves them right!

1984 may have come late, but at least it's here.

Richard Brown   12/08/2013   10:48


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