Like his predecessors, the new FCA chief executive Nikhil Rathi will want to put his stamp on the City watchdog when he takes the helm in the autumn.
From his time as the head of the London Stock Exchange, Rathi has built a reputation of being forward-thinking, approachable and grounded, strengths he will no doubt have to call upon as head of the UK’s financial regulator.
Rathi has spoken of his desire to focus on vulnerable consumers, to embrace technology and to help play a part in tackling climate change. All noble pursuits.
But he must also try hard to repair the regulator’s badly damaged reputation in the eyes of many who work in the UK’s financial services sector. Here’s how he can start to do that.
1. Make the FCA great (again?)
Under his predecessor Andrew Bailey’s tenure, the regulator came under fire over a number of issues including overdraft fee hikes, its handling of the Neil Woodford debacle and its inaction in the Royal Bank of Scotland small business saga.
Steadying the ship and giving reassurance to both consumers and financial services firms would be an important first step in fixing this.
Much of it comes down to culture – and the less said about the vulgar reports of employee behaviour that emerged towards the end of last year the better.
Such dismal reports are very discouraging from an organisation that is supposed to set the tone. Poor behaviour needs to be stamped out, fast.
2. Better decision making
At times the FCA has seemed to overcorrect on issues and blunder into the wrong result.
Take overdraft changes as an example. The regulator sought to stop banks from charging hefty fees on unarranged overdrafts as it felt those customers who paid them were more vulnerable and ultimately funding everyone else’s cheap borrowing.
But its rule changes led to banks hiking charges on their arranged overdrafts to make up for the loss of profits. In effect, the regulator inadvertently cut off a perfectly viable form of revolving credit for millions of people.
The banks coalesced around 40 per cent APR. According to the FCA, this looked suspiciously like collusion on price, which it promised to investigate before announcing a bizarre U-turn.
Such muddy thinking and poor decision making can be stamped out by considering the secondary impact of rule-making and using innovative methods to better predict outcomes.
Some areas of government have done this already to good effect through the use of behavioural economics and the government's Behavioural Insights Team on projects such as auto-enrolment.
3. React quicker
The problems over unsuitable pension transfer advice for British Steel members happened in 2017, yet the subsequent ban on contingent charging was only confirmed in June this year.
While acting carefully, gathering evidence and canvassing opinions can be the responsible thing to do, sluggishness has two profound impacts.
Firstly, consumers continue to be ripped off until whatever the issue is gets resolved.
The second problem is that the lengthy regulatory limbo discourages active participation in a market by the vast majority of decent, honest advisers, as we saw with the defined benefit (DB) pensions market.
4. Professional indemnity insurance
Nucleus' latest census shows the extent to which advisers are struggling with the cost of professional indemnity (PI) cover, with a shrinking market and soaring costs.
The sector can’t be allowed to devolve into a duopoly of insurers offering painfully expensive cover, or even disappearing as an option completely, as it will make advisers’ jobs and the sustainability of their businesses nigh on impossible in many circumstances.
What's happened with DB transfers has shown how a lack of affordable PI cover makes it difficult for many to offer advice in this space.
A significant change is required to rectify this.
Perhaps the FCA should look to other insurance markets for examples where the regulator has stepped in to fix a broken market.
A good example of this would be the Flood Re scheme, which was created to reinsure properties that were considered 'uninsurable' thanks to significant flood risks.
It has been a fantastic success for consumers and providers alike.
Innovative measures should be encouraged to overcome market failure. Unclear rules and red tape should not.