Over my time in this industry, from the late 60s until now, I have seen many changes in the world of regulation, often linked to a new regulator or a new head at the regulator of the day.
Think Nasdim, FIMBRA, PIA, FSA, FCA. These have included varying attempts at rules-based regulation, principles regulation, RDR, TCF, DEI and now consumer duty.
Regulation was born out of a very real need but has metamorphised over the decades to be an example of regulation for regulation’s sake.
Life is, unfortunately full of unpredictable events, bad things happen to people seemingly for no reason and more rules or increased protection will not stop that no matter how hard regulators may try.
The firms that all these changes will impact most are likely to be the smaller, less well-resourced, who are still around despite what feels like attempts to get rid of them.
Small firms should be able to take comfort that although they have the same responsibility as larger firms, it should be proportionate and relevant to the size of the firm.
But there is no measure for proportionate. It is in the eye of the beholder, in this case the regulator.
The FCA, from what I hear, is getting frustrated about FG21/1. I understand from a very reliable source it is 'beyond disappointed’ that firms have not implemented what was asked of them in 2021.
Fixing what wasn't broken
Having read their guidance note, I am minded to ask, what was wrong with the TCF pathway?
At very best this could have been updated at a much lower cost in time for all involved. This is a great example fixing something that I do not believe was broken.
It comes therefore as no surprise that the FCA is now conducting a review that will look at whether firms they regulate “understand consumer needs and whether their staff have the necessary skills as well as product and service design, communications and customer service, and whether these support the fair treatment of vulnerable customers”.
The word vulnerable is defined as something or someone that can be easily harmed or affected by something bad.
Having now been discovered by the FCA, as it looks to increase fee and fine revenues, it has been given a much wider definition and place in the rule book.
I believe the actions it is taking should cause concern for those it regulates.
The FCA view of vulnerability is seen as “a spectrum of risk. All customers are at risk of becoming vulnerable, but this risk is increased by having characteristics of vulnerability.
"These could be poor health, such as cognitive impairment, life events such as new caring responsibilities, low resilience to cope with financial or emotional shocks and low capability, such as poor literacy or numeracy skills”.
The words the FCA needs to concentrate on are “All customers are at risk of becoming vulnerable” because the real risk consumer duty presents is to advisers not the customer.
