Regulation, the one-way Street 

Two recent experiences of the FCA are indicative of the essential non-learning, non-listening nature of regulation.  One of these relates to the recent Thematic Review on Due Diligence, and is probably best set to one side for the moment.  The other requires a more extended explanation, but is interesting insofar as it betrays the profound cultural dysfunctionality at the heart of the FCA.  It concerns the FCA's taking over of Consumer Credit regulation during 2014-15.

Firstly, and this is merely a historical observation, the actual process of obtaining the requisite permissions was a protracted one, extending over a period of around 12 months, during which we had to continually chase for some sign of progress.  The intermittent nature of the approval process, and the lack of any kind of follow-through gradually led to a sense that one was having to morph into some kind of objectionable bully in order for anything to happen at all.  Furthermore, the passage of time began to impair one's own memory of progress, and inevitably resulted in the kind of repetition of the background narrative, so that entire phrases were committed to memory.

Secondly, and this became apparent during telephone interviews with the FCA during the approval process, it became clear that 'Consumer Credit' had morphed, in its process of transition, into some kind of monolithic bureaucracy so that it seemed quite difficult for FCA officials to understand how it would then apply to the kinds of financial-planner which ValidPath supervises.  Officials could 'get' the correlation if one reduced everything to 'products', but understanding the broader applications to professional planners who would, quite naturally, tackle debt-management as part of a wider financial strategy, seemed to be a big ask.  Repeatedly, we had to emphasise that the reason for applying for these permissions, was not so that we might do something new, but rather to allow financial-planners to continue doing what they always had done.  After a while, one had a sense that one must be speaking a completely foreign language, or perhaps exhibiting some kind of profound misunderstanding that one's interlocutor is too polite to point out.

Thirdly, once we did receive our approval notice via email, what nobody had pointed out was that, buried in the small print was an instruction which covered the possibility that we might want to amend the permissions of our Appointed Representatives (ARs).  Clearly, with the benefit of hindsight, one can see that this is simply a standard wording (beware standard wordings!), but more importantly, there was no "if" about this.  During innumerable prior telephone conversations, we had made it clear to FCA representatives that the only reason for putting ourselves through this purgatory, was in order to preserve the permissions that our ARs had always depended on.  Based upon extensive actual communications, why would any sentient being think that this might be a kind of 'optional extra'?

Fourthly, the instruction given in the FCA's permission email (complete this Excel spreadsheet and email it to this address) did not work anyway!  It was a sop to larger networks, and for smaller (more selective!) concerns, the only option available to us was to make a separate application for each individual firm within our Network.  Given the slow and tortuous nature of the functionality of the FCA's online system (Connect), that represented a further two days of solid work, the kind of work which progressively saps all joy out of human existence, and reduces one to a faded, snivelling shell of one's former self.

Fifthly, having then embarked upon a protracted series of individual applications on Connect, in precise compliance with the instructions received, we started receiving queries from the FCA as to why we were doing this thing?

I think it important to give the FCA the benefit of the doubt:  I am sure that it's representatives don't set out to transform regulated firms and individuals into a kind of miserable, disempowered underclass.  But that is the cumulative effect of the way things are put together.  And, more to the point, it's not improving.  After more years of a regulated existence than I care to recall (PIA, then FSA and now FCA), there is little evidence of a developing understanding of the aspirations and advisory models of intermediary firms.  Our Consumer Credit permissions experience is indicative of a culture where regulation is seen as something imposed upon a category of being which is assumed to be sufficiently plastic to adapt to the regulatory framework, rather than vice versa.  This does not seem to represent a healthy state of affairs.

There must be a better way...

ValidPath is working hard to create a collaborative Network where Member expertise is recognised and put to good use.  We've made a good start with our Pension Transfers Working Group.


Kevin Moss, 26/02/2016