The FCA’s business plan for 2019/20 puts culture and governance front and centre of its key objectives for the coming year. 

    This is presumably because the profession continues to suffer from the actions of a minority of rogue advisers, who allow the prospect of profits to drive behaviours. The almost inevitable result is another misselling scandal.

    I have spent many, many hours now speaking to and reviewing the files of steelworkers who were advised to transfer out of the British Steel Pension Scheme. 

    What I had not asked myself until seeing the FCA’s business plan, was whether the bad advice I've seen in some of the files I've reviewed was driven by a bad culture and, if that changed, whether we would see a downturn in misselling cases. 

    The FCA’s view, as set out in its mission document, is a resounding yes. The regulator says: “Culture and governance can either drive or mitigate harm to consumers and markets, leading to positive or negative outcomes."

    FCA director of supervision for retail and authorisations Jonathan Davidson spoke in 2018 about a ‘Tale of Three Cultures’, in which he identified three different types of firms:

    • “We want to serve our customers with integrity” firms;
    • “Take no prisoners, we're here to make money” firms; and
    • “Let's pursue our strategy but make sure we are compliant with the rules” firms.

    There are some firms who advised steelworkers on transferring who provided clear, suitable advice, and had robust processes in place.

    But unfortunately, based on what I've seen, there are also a small number of firms involved who fall into the second type. 

    Many steelworkers had meetings lasting less than an hour, in total, and none had the alternative options spelled out to them.  

    All were worried and confused by the baffling pensions landscape. Shockingly for some, transferring was the only option discussed with them and few have received proper, if any, annual reviews since the transfer took place.

    And so, if the firms' culture had not been to focus on the money, and on the fee to transfer (which in many cases was contingent on the client transferring), then would the results have been different? 

    There is no doubt in my mind that the answer must be yes. 

    The place we should seek to get to is one where every firm strives to be the first type of firm. 

    Where every adviser recognises the power they wield in the inequality of information and knowledge between themselves and their client, where the service is truly driven by integrity. Only then will the industry become a profession.

    It is not sufficient to nod or to pay lip-service to the need for good culture. 

    The FCA will be requiring firms to demonstrate awareness of its expectations on culture, reflect this in their practices, and make specific improvements.

    This FCA discussion paper on transforming the culture in financial services is a good place to start, as is this report from the Financial Stability Board on governance and risk.  

    I have little doubt that those firms who have been found to give poor advice and who made lots and lots of money out of the British Steel transfers persuaded themselves they were doing a good job. 

    The steelworkers all wanted to transfer out, right? They needed advice quickly and the firms worked hard to get the paperwork through in time. 

    I can genuinely see how the stars aligned to create the perfect scenario for this misselling catastrophe – which will inevitably be paid for by everyone through their Financial Services Compensation Scheme levies.

    But had those particular firms had a culture focused on service and not money, I think the numbers of those transferring would have been far, far smaller.

    How will you demonstrate to the FCA the worth of your culture?

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