You probably didn’t notice the latest interview with Linda Woodall at the FSA….
Reading into the logic of the regulator leaves a cold feeling of cronyism, at best the regulators view can only be described as an incredibly ignorant perspective.
May I boil down and share an interpretation of these FSA “pearls of wisdom” for you?
So the FSA says…
- Friction is inevitable between entrepreneurs and the regulator (and this is good)
- The regulator is concerned with customer detriment and entrepreneurs are often not.
- The FSA has met firms who personify the types of firms it would like to see thrive post RDR.
(Here is the link for later if you want to check the actual archaic comments made: http://bit.ly/R6aPNS )
A better perspective…
- Friction and tension come from a lack of clarity and mutual understanding between people or groups. This is to be avoided and is bad.
Is tension a good thing between members of a family or between countries? Is friction a goal which organisation aim to foster between employees? No.
A willingness to accept tension and friction is to absolve responsibility for running an effective organisation or an effective relationship. To state that this is actually a goal for the organisation? What a shocking manifestation of the FSAs insular culture?
- Entrepreneurs are good people whose efforts benefit customers, they are also actually only successful to the extent which they benefit society.
Entrepreneurs start and run businesses; these businesses are recompensed for the contribution they make to society by their earnings.
The products and services making up this contribution are occasionally brand-new to society or more often they are improvements on what already exists (usually quicker, cheaper or with better quality or service etc..).
Entrepreneurs consistently making marginal improvements (or massive ones) are doing so in order to benefit the customer, this is the best thing about the “law of competition”. This relentless drive for profit from contribution to society should be encouraged.
- The FSA have absolutely no right whatsoever to choose the “type” of firms who will be successful in the UK Financial Services business, that’s the job of the UK public.
The regulator must stick to its Four statutory objectives, it must not be allowed to develop along its own lines. Voicing its opinions as to who should succeed in business (or even that is has an such opinion) breaches the law of competition. This crosses the line into cronyism and away from regulated capitalism.
An old regional manager in the North West at the Woolwich once warned the author to be careful with his exuberance for his craft… “people recruit people like themselves” he warned “so the further up an organisation you manage to put a plonker then the more harm they will do to it”
Does this analogy remain true for industry and society as a whole?
How long will this industry be held back and destroyed by an expensive regulator holding to these harmful and archaic perspectives?
Any comments please share with us …
So true and such a shame for the industry
The Financial Services Industry, like the proverbial baby was thrown away with the bath water many years ago. The FSA have searched the drains and have tried to rebuild it with what they found there.
I don’t entirely agree with either the FSA or you!
There is a tension between an innovator and any regulator; the innovator will be trying to keep as much money as possible and the regulator will want the costs to be minimised. No one designs new stuff for nothing and someone HAS to pay.
In a true free market, business will go to the most efficient, as everyone will know who that is, but this is NOT a true free market. The regulator is supposed to be stopping the exploiting of clients as cash cows and marks in a confidence trick; in this they have failed. (Don’t tell me that all business entrepreneurs are altruistic angels as this is also manifestly untrue!).
1. Friction is not inevitable as you correctly point out but it can be useful. It can make sure everyone is accountable and doing their job correctly. The problem is, I don’t believe the FSA see it as being 2 way. Let’s not forget that the biggest financial disaster in living memory happened on their watch probably because there was not enough friction going their way.
2. Entrepreneurs can also be crooks and swindlers. In fact, their propensity to take greater risks also means they can cut corners. Good entrepreneurs should be rightly congratulated and the regulator should properly protect us from the bad ones.
3. In a true free economy the public would choose but this industry is regulated. So the FSA has every right to set out what best practice looks like and expect as many firms as possible to adhere. Would you be happy to go to an hospital than can pick and choose how to treat you?
The real problem here is that many hard working people, with the customers best interests have been sadly let down by the financial services industry. Is the regulator guilty of crony-ism?… yep but product providers, advisers, banks, networks have all done their bit to take what they can from the public’s money.
Stephen
I take a simpler view.
It would seem that David Cameron is not the only Brit not to know the Magna Carta wordings. Regulators don’t know either.
In this country a man is innocent until proved guilty. But compliance organisations all seem to start from the opposite point of view, ie all brokers are up to no good and we will prove it, and if we can’t prove it that means they have managed to conceal their misdemeanours from us.
Interestingly when one reads the money advice pages of our newspapers, rarely if ever have I seen a reader complaining about a small broking firm. Direct writers, banks, on-line quotes etc yes, but never the small broker.
Dear Stephen,
I totally agree with your comments .
Regards
Brian
It is sad that the Country is in a recession, the government give the public EIS and SEIS to invest in, yet advisors, may soon loose the right to assist individuals to certify that they want the risk of investing and helping the businesses grow, please convince as many people as possible to reply to the latest consultation paper on suitability
words of wisdom indeed…
This is the kind of incisive view that needs to be heard by the TSC (Andrew Tyrie or someone with real power to influence affairs)
Hi Stephen
The only happy IFAs I see around are retired or left the industry.
So as a retiring IFA you must be happy.
Stephen
I loved your anecdote from the woolwich, I couldn’t agree more. Business recruitment always trend towards the individual at the top or at the top of a dept.
The FSA have destroyed our once great industry, both so far as IFA’s and Brokers are concerned. They have equally damaged the public and continue to do so.
We are governed by a QUANGO, designed to fail, and seemingly designed to damage the market as a whole. There should be an independent inquiry into how Sant’s and Co. have behaved, and I believe if truly ‘impartial’, would most likely find them guilty of ‘Criminal Negligence’… they seems to be little more than an agent provocateur for the banking industry… and just look at what the banks have done to our industry/economy/lifestyles…
Personally, I believe a set of gallows in Canary Wharf would be nothing short of a good thing… harsh I know, but in perspective…
An excellent summary ! you should circulate it to all members of parliament, including of course the treasury select committee
First Class Steven.
What more can be said.So, so true.
Carl
Dear Stephen,
Thank your for a well written and thought provoking piece.
Very well done and you hit the nail on the head!
Kind Regards,
Phil
Dear Stephen
Thank you very much for pointing in the direction of this article and please accept my apologies for the delay in responding, but I’ve been away in the Republic of Ireland at the Five Nations Congress, at which the issue of financial regulation came up.
I cannot believe the comments of Linda Woodall at the FSA and it’s probably good job that they won’t be around for much longer. However, her comments really show the approach the regulators are taking and it is one of hostility and conflict, rather than working together to minimise risk and maximise benefits to all.
These comments will be very in my thoughts as I begin the process of discussing financial regulation within the care sector.
Best wishes
Martin
Pingback: FSA/FCA – Time to re-build the regulator? « Stephen Hagues…The Distribution Revolution