1st October 2009

Shock the Monkey

In the words of Peter Gabriel - Wheels keep turning, Something’s burning, Don’t like it but I guess I’m learning.

The song was inspired by the Milgram experiment, a series of social psychology experiments conducted by Yale University psychologist Stanley Milgram which measured the willingness of study participants to obey an authority figure who instructed them to perform acts that conflicted with their personal conscience.

The extreme willingness of adults to go to almost any lengths on the command of an authority constitutes the chief finding of the study. Ordinary people, simply doing their jobs, and without any particular hostility on their part, can become agents in a terrible destructive process. Moreover, even when the destructive effects of their work become patently clear and they are asked to carry out actions incompatible with fundamental standards of morality, relatively few people have the resources needed to resist authority

Well, I guess we are all learning now. The Sunday Times was running an advertisement on the front page of it’s Appointments section asking for applicants to replace Walter Merricks when he leaves shortly.

The successful applicant should have the ability to “manage complex relationships” with the FSA, HM Treasury and the OFT” as a key part of the job. It went on to say that “candidates must have experience in leadership and strategic thinking and prior exposure to “a complex stakeholder environment”.

All well and good you may say, but wait for it; “experience of resolving complex disputes, experience of financial services, a legal qualification and an understanding or exposure to regulation” was desirable but not essential.

For many IFAs the actions of the FOS have run unchecked for a number of years, their decisions are final, binding and unless the firm has deep pockets, un-appealable and ruinous. Many IFAs will have experience of stale claims, normally complaints manufactured by unscrupulous clients relating to business conducted many years ago found against them because FOS staff often do not understand or have experience of the industry IFAs operated when the advice questioned was given. They are often unwilling to take the view they should (based upon the client’s circumstances at the time of sale, the evidence available and the balance of probability) when considering a complaint and operate with the benefit of hindsight.

Therefore, where are we when a vital part of the machinery of regulation set’s out to recruit someone to oversee this branch of the Leviathan who does not need as a basic qualification to do the job, an experience of financial services?

Regulation is now big business, it is self perpetuating and needs to devise more reviews, assessments, monitoring and “cunning plans” than even Baldrick could have imagined to justify it’s existence. This “business” has failed the country and the industry when it was needed most because in the eyes of many IFAs at the very least, FSA regulation is regulation by the bully.

They have kow-towed to the banks (they even borrow from the banks they regulate) and have decided to go for the easy IFA target once again within the RDR proposals. Regulation for IFAs, the least successfully complained about sector in the industry by far, is flawed. It is wrong regulation, directed at the wrong people for the wrong reason in the wrong way.

If we are going to have regulation that works then let’s start by making sure that those overseeing it as well as those doing it are qualified to do so and have actual experience of working within the sector it regulates.