Following Martin Wheatley’s latest pay rise, Phil Young ponders some of the issues facing the financial services industry.
Chris Hannant has written to George Osbourne on behalf of APFA members, asking for a reduction in regulatory costs. Not many advisers will disagree, and the announcement of Martin Wheatley’s pay rise is untimely. But focussing on FCA fees doesn’t really target the problem. The biggest hike in fees from the invoices I’ve seen is in the FSCS levy.
Whilst the debate around cutting regulatory red tape etc rumbles on, here are two very practical steps which could be taken to reduce the FSCS burden with no consumer detriment.
- Standard PI terms: An adviser recently pointed out to me that other professions such as accountancy have standard terms, agreed by their regulatory body, without the wriggle room allowed insurers in the advisory market. It’s too easy for insurers to avoid liability or simply stall on a pay-out assuming a high percentage of claimants will give up if they make it hard enough.
2. Compulsory run off cover: Bringing this in for existing firms would reduce the long term impact on FSCS claims as few firms sell on their liabilities. The increased capital adequacy requirements should adequately cover this for most firms.
"Put the job of solving the financial services problems squarely in the hands of the financial services industry."
Both should be very quick and cheap to impose. Standard PI terms would be welcomed by most business owners, not just those exiting. Stricter terms might be more expensive but cheaper than the current levies, and fair to all firms as the premium is based on risk not turnover.
Current lobbying often (perhaps unfairly) appears clumsy when stripped of the detail and comes across as self-serving in the press:
- Asking for a longstop does nothing to protect consumer interest (the purpose of the FCA) and is largely to the advantage of a small number of larger nationals and networks. There is no consumer benefit.
- Asking for regulatory fines to be returned back to ‘the industry’ as a regulatory dividend seems unjust – the public (and therefore politicians) are unlikely to distinguish between different regulatory categories of firms. Consumer research heavily backs this up – all are tarred with the same brush.
I’m not sure what the reality is, and terms like customer-centric make me nauseous, but there is a desperate need to do two things to convince my mum, never mind Gideon, that we’re worth listening to.
- Make sure every solution put forward mentions, benefits or at least does no harm to consumers.
- Put the job of solving the financial services problems squarely in the hands of the financial services industry.
It should be noted that the new pensions minister is a consumerist, the new government is hanging its hat on consumerist rhetoric, and the FCA/FSCS/FOS exist to protect the consumer. Consumerism, feigned or otherwise, is the currency of these times. Missing this is a direct route to failure.