Chance for new regulator to win industry friends

5 July 2010

When you consider the reputation the Financial Services Authority has ended up with it’s clear the new Consumer Protection and Markets Authority could do with the backing of the industry.

And it can win friends easily by getting involved at a grass roots level.

Just last week my compliance officer asked whether we needed to implement some recent changes we had decided on if the FSA is never going to see them.

It’s a fair point - who knows if the regulatory regime will change such that in six months we find ourselves rewriting all our forms yet again?

But it’s unlikely that there will be a radical change - more likely a shift of focus, and probably then only until another market crisis hits the media.

The CPMA is apparently going to focus on cutting consumer mis-selling at the product level rather than considering new ways of scrutinising our advice.

This does not bode well. Product innovation is sorely needed and should not be stifled. There’s also the risk that entire product types will be banned to protect consumers from us and themselves.

A better market would include lots of products and consumers able to access them through trained experts - certainly not only directly via banks.

One can’t help but worry that the new regulatory body has been named to fit the current crisis

The FSA’s Retail Distribution Review will apparently still be implemented.

The proc fee debate has not been concluded so this presents a great opportunity for the new regime to show it understands that IFAs and brokers, along with other types of financial businesses, are too varied to be governed by blanket regulation.

If consumers are to be truly protected they have to be dealing with companies whose regulator has tailored its rules to suit specific businesses.
Of course, the big question about regulation is not whether regulatory activities are worthwhile but whether the time and money spent on them is proportionate to brokers’ businesses.

When statutory regulation came in the cost of new staff and Key Facts Illustration systems was considerable.

In the industry, we joked among ourselves how much we could save ourselves and consumers if we simply compensated the two complaints we received each year.

So one can’t help but worry that the new regulatory body has been named to fit the current crisis. Had it been borne of the early 1990s recession would it have been called the Office of Consumer and Exchange Rate Protection?

When the Mortgage Code Compliance Board was formalised into the FSA our basic compliance activities broadly stayed the same - fact-finds, business registers and the font size of APRs used on advertisements.

Rose-coloured memories perhaps but somehow when the system was voluntary it felt more like a regulator we were endorsing and wanted to be part of.

And in terms of changes to the regulatory system it’s not unreasonable to imagine that a rose by any other name would smell just as compliant.

But at least this is an opportunity for the new regime to do a better PR job than the old, not just for consumers but for brokers too.

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