Tim Sargisson: Bad practice needs calling out more than ever
Speaking at the recent Money Marketing Interactive conference, FCA co-director of life insurance and financial advice supervision Debbie Gupta highlighted a major concern for the regulator, which is advisers’ failure to call out bad practice. As she pointed out: “We need a common understanding on both sides that we are in fact on the same side and we all need to get to a place where we know what good practice in the industry looks like.”
On the face of it, a very sensible approach. However, the level of mistrust between advisers and the FCA on this matter is reflected in the comments posted after Money Marketing published a related story. Of the 18 comments, the vast majority were overwhelmingly negative towards the FCA.
In the past, I have argued that as a profession, we have an obligation to call out bad practice. One of the key benefits is because it is part of the process to raise standards, limit the damage to the profession’s reputation and, in time, should reinforce our standing in the eyes of the public.
One of the arguments put forward by advisers to sit on their hands is because they see it as a waste of time. Presumably, it is better to do nothing in the hope that what they have seen comes to nothing, rather than raise a red flag in the hope of positive action on the part of the regulator.
There is no doubt that advisers have reported concerns and yet nothing seems to have been done as a result. In the case of London Capital & Finance, Neil Liversidge of West Riding Personal Financial Solutions says he raised his own concerns with the regulator three years ago. Last month, the company collapsed, leaving 11,500 investors wondering where their £236m went.
Part of the problem is the size of the universe and with it the amount of resources required to police it effectively. In our own solar system, there are 5,281 retail advice firms and 89 per cent of them have five advisers or fewer; 8,763 advisers in total.
You only need a few outliers to create systemic issues. This size and limited resource provides the real need for advisers to speak out about bad practice when they see it.
The good news is that last year, the FCA increased the resources it allocates to managing and handling complaints from whistleblowers.
Whistleblowing information has helped it issue fines and warning letters to firms and individuals, vary and withdraw permissions, and conduct other kinds of early involvement, such as asking firms to change their business activities.
Figures also show that 13 per cent of reports to the FCA’s whistleblowing team in 2016 directly contributed to enforcement action or have been of “significant value” to the regulator.
Our work in reporting what we see could avoid a course of action from happening. This then prevents piling more Financial Services Compensation Scheme liabilities on the rest of us. After all, the fact that any efforts on our collective part could reduce professional indemnity costs and FSCS levies should provide all the encouragement needed.
Published on the 30th April
