Measuring everything 

I am long enough in the tooth to have reasonably clear memories of the time when the (then) FSA required us to report annually, via a paper return, a limited amount of relatively explicable information.  The process was somewhat onerous, but the nature of it made sense, and I do not recall a single instance of our submitted returns triggering any kind of query from the regulator.

Then we moved to online reporting, the kind of transition which simply opens the door to infinite inflation.  The frequency of returns doubled, and so did the quantity of data requested.  The proliferation of new online questionnaires seemed at times almost exponential, and (of course) this meant that it was largely impossible to learn from experience, because each reporting session was jam-packed with novelty.  The multiplication of data-requests was not accompanied by an even remotely proportionate increase in relevant guidance - you clicked on one of those 'i' hyperlinks, and you could end up almost anywhere, but certainly not in a place which supplied a clear answer to anything.

Of course, once you are on this kind of treadmill, the designers of it cannot resist the continual tweaking.  Why ask for ten pages of data, when a hundred will gain you much more, irrespective of whether it is (a) relevant, or (b) ever analysed in a way that makes sense of it?  At ValidPath, our main Gabriel returns occur on a quarterly basis, and each one absorbs huge quantities of staff time and expertise in order to verify the data and ensure that it is accurate and reliable.  And that's just the main ones!  Running in parallel, we now have COVID reporting (currently in mid-process), financial crime reporting and DB Pension Transfer reporting, where you can pretty much guarantee that the FCA will mis-analyse what we tell them.  That is to say, the machinery of regulatory reporting has morphed from an occasional, manageable event that one could plan well in advance for, into an endless conveyor belt that is always steadily increasing in speed.  Or, to employ another analogy, what's the best way of boiling a live frog?

It seems that dear ole Gabriel is being retired, and will be replaced by a brand new system.  I think it safe to say that intermediary firms should expect more of the same, because the consistent lesson from (in my case) more than twenty years under regulation is that the obvious lessons about the sensitive interaction between bureaucratic demands and the fundamental components for commerciality never actually get learned.  All there is, is the pathology of consumption - in this case the insatiable demand for data, as much of it as possible, irrespective of whether or not it is telling you anything meaningful about some version of reality that any of us might be able to identify.  Of course, one of the byproducts of this kind of appetite is that it becomes progressively less discriminating.  We have had a number of instances where the FCA's self-validating forms refused to 'complete', despite having submitted rigorously verified, accurate data - and on querying the matter with the Firm Contact Centre, we were instructed (on several occasions) to 'fake' the numbers so that the submission would complete.  This speaks volumes about the aims and objectives of such monolithic regulatory systems.

There are a few lessons here which are worth mulling over:

  • The inherent nature of the FCA's regulatory reporting requirements is fundamentally antithetic to the running of commercially-viable intermediary businesses.  The sheer toxicity of the thing is underestimated by those unfamiliar with it.  Prolonged direct experience of this environment has directly influenced what ValidPath does for its members;
  • There are three characteristics of data which allow the intelligent user to reliably interpret and use it:  sufficiency, relevance and currency.  The mere access to 'lots of information' is a meaningless (and potentially misleading) state of play - which is why ValidPath places such a consistent emphasis on the nature of fact-finding, the rigour of diagnostics, and on ensuring that the client's financial cake is baked using only the freshest of ingredients;
  • There is a linear connectedness between the distinct phases of the advice process, which, cumulatively, leads to consistently excellent outcomes.  Here's what it looks like:


Kevin Moss, 24/09/2020