Realism not Cynicism 

Those who know me will already be aware that I am far from convinced that the 'Big Regulation' system that we are subject to actually works in the client's interests in practice.  I am not entirely sure that the Regulators actually understand the nature of our role, nor do their processes for delivery seem to match up with the real world.  It seems that when one becomes subject to the system of Big Regulation, with all of its concomitant costs (direct and indirect), the only way to ensure that the client is not disadvantaged is for intermediaries to continually accommodate.  This is something we have become most adept at doing over the last decade or so, and it is probably the only successful strategy open to us.

Big Regulation is driven by a set of political beliefs about the world.  It prefers the idea of 'compliance' to the idea of 'professionalism', and inevitably the outworking of the regulatory process leaves less and less space for the latter.  This is based upon a clear choice - a reliance upon the idea of professionalism almost inevitably means that the kinds of standards which one would regard as desirable are only likely to be adopted by the few.  Regulation therefore protects the many consumers at the expense of the few professionals who would have sought to maintain the highest standards in any case.  It doesn't provide an ethical or professional framework which would be preferable to what such firms would, in any case, have in place by virtue of their own culture and aspirations - for such firms, Big Regulation adds a heavy additional flywheel to the machinery of commerce, making it less efficient and competitive.  At times, it insists on things which seem like a complete distraction to the real business of delivering excellent value to discerning clients.

Regulation therefore is pragmatic.  There is, built into the assumptions, a direct correlation between the nature of the costs, and the value deliverable to consumers in terms of protections.    It therefore favours a 'lowest common denominator' approach to retail financial services - indeed, the favoured designation of clients as 'consumers' is a clue to the nature of the model.

For those of us who have aspirations towards a better, more professional way of doing things, sometimes our response to regulation is characterised by cynicism.  It is not an unsurprising reaction, on the whole, especially when aspects of regulatory politics produce such undesirable results (eg. the fostering of a redress culture).   However, I do feel there are grounds for a more positive view of things.

Firstly, having spent somewhere in excess of three years attempting to support one of our Member Firms through a FOS investigation in relation to a peculiarly groundless and egregious complaint, we have been relieved to learn that the Adjudicator has reached exactly the same conclusion that we had reached two years ago.  Underpinning this outcome has been the Adjudicator's explicit acknowledgement that our Member had behaved throughout with integrity, transparency and professionalism - and presumably the implicit awareness that the complainant had exhibited none of those characteristics.  Sometimes these sorts of qualities do actually shine through, even when the details of a case may, at first sight, appear confusing - so, my conclusion is that professionalism does pay off, after all, even if sometimes we think that it may all just be wasted effort.

And secondly, I was gratified to read recently of Rory Percival's comments on documenting suitability, delivered to the IFP Paraplanning Conference.  Hastily, I turned to our own online guidance on the matter to see if we were adrift at any key points, and was encouraged to see that, barring a few minor tweakages in wording, we were pretty much bang on the money in terms of reflecting the FCA's expectations.  This is a really hopeful sign of realism within the regulatory culture that dominates our lives, and I hope ValidPath Members will see it in the same way.

Related Resources for ValidPath Members

Access our guidance on Suitability Reports here.


Kevin Moss, 29/05/2015