Choppy waters? 

I have just returned from a week sailing in the Ionian with friends in a 37 foot 'Bavaria' class cruiser.  As a complete novice, I was grateful for my friends' vast experience and skipper qualifications, but even so it would be fair to say that my mental picture of sailing conditions tallied closely with the picture you see above (which I took, as we slipped anchor early one morning).

And, of course, at times it was just like that.  A limpid expanse of azure water, lapping gently at the keel of the boat.  The faintest zephyr of wind filling out the sails, and the muted creak of the hawsers.  Sitting on deck in the warm evening air, watching the sun go down and sipping a glass of that intriguing wine that tastes great whilst you're out there, but which you'd never dream of bringing back with you...

Of course, that wasn't the whole picture, not in September.  Oh no.  My colleague, who knows her ketches from her gaffs, tells me that a Force 6 wind is "not a proper gale", and it is entirely possible that I am just a wimp.  However, when your anchor is dragging at 2.00am in the morning, and you are in imminent danger of being blown onto the rocks by a storm that the weather forecast has somehow failed to mention, then it certainly feels like a 'proper gale'.

Seawater is funny stuff.  It can be totally different things within very short periods of time.  Even when it's like a millpond, the passing ferry leaves such a wake behind it that, briefly, one feels like the contents of a cocktail-shaker.  Thank goodness for strong stomachs.

Which is (and you were wondering when I'd get to the point, weren't you?) a bit like the regulated world.  Conditions can change abruptly and end up becoming quite difficult for all of us, bobbing in the sea of bureaucracy.  There are various forces in this pond, which are capable of setting the waves a-dancing, and the biggest single force, by far, is the FCA itself.

So...the FCA has just announced that it is set to launch a new thematic review, this time focused on due diligence for retail investment advice.  We know from past experience that thematic reviews, in terms of ripple effect, can form the nautical equivalent of a brick being dropped into a puddle.  PII Underwriters run for cover.  Suddenly a new redress scheme appears out of the blue, like one of those bloated, poorly-engineered Greek ferries.

The FCA has identified that, at the heart of all of the previously-identified cases of unsuitable advice, insufficient due diligence is the common theme.  It could be right - although there is a slightly worrying sense of ambiguity about the categories of information that advisers may reasonably rely upon.  Rory Percival speaks positively about data from "third party providers of factual information" and indicates that you can take a fund-manager's disclosures of asset-allocations and asset-holdings at face value.  He then specifically highlights Arch cru and KeyData as examples of crystalised risks resulting from poor due diligence.  The problem in these cases, is that even that factual information would not have helped the poor IFA who used these products.

All of us will be following this one with deep interest.  In the meantime, thank goodness we have strong stomachs...

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Kevin Moss, 03/10/2014