Regulation, competition and consumers

Panacea comment for Financial Advisers and Paraplanners

2 Jan 2018

Regulation, competition and consumers

Please do not get me going so soon in 2018, after all it’s only the first full working week of January

The FCA has released the minutes of its November 9th board meeting. Buried within the text was an interesting section on competition. The minutes noted that:

The Board received the draft Approach to Competition document outlining how the FCA seeks to promote competition in the interests of consumers. It was noted that surveys had shown that competition was the least understood of the FCA’s objectives and so the document would form a useful piece of communication, demonstrating that FCA regulation promotes competition, which is fundamental to making markets work well.

There is something very wrong, very wrong indeed. Could it mean that somebody in Canary Wharf is having a Damascene conversion.

By default or intent, the various regulators over the years I have been active in the industry, from Nasdim, FIMBRA, PIA, FSA and FCA have spent their time in ensuring that the very last thing done is to promote competition. In fact, the very daily act of regulation would seem to be to do the exact opposite.

I think we could look back at many examples of this such as the removal long ago of the maximum commission agreement to RDR, the removal of commissions and a move to fee-based advice.

I had the great fortune to sell my IFA practice 12 years ago, a driver for taking the plunge was that having worked under the ‘control’ of four different regulatory regimes- NASDIM, FIMBRA, PIA and FSA. The prospect of never seeing longevity of regulatory regimes, the application of common sense and fairness all went to paint a very bleak future.

The jury may still be out in that regard, but I think we are at the stage where the judge may be directing the jury that a majority decision would suffice.

I am not normally driven to negativity, cynicism maybe, and while I do see an absolute need to have regulation of financial services, it seems to me that wherever there is regulation, consumer detriment and extreme cost is the outcome with blame being laid at the door of the weakest.

Some key facts to digest:

  • Regulation is poorly thought out in just about every industry
  • It is reactionary rather than pro-active
  • It is not always retrospective, although in financial services it seems to be an exception
  • Nobody ever listens to the voice of experience
  • Nobody ever learns from past failings
  • Nobody in regulation admits failure
  • Nobody in regulation takes the blame
  • Everyone in regulation benefits from yearnings, learnings and earnings
  • Regulatory failure is rewarded not punished
  • Regulation is an industry, it is hermaphroditic, capable of self-procreation and without something to bash it would have no purpose. As Keith Richards (Rolling Stone not PFS) once said “In the business of crime there’s two people involved, and that’s the criminal and the cops. It’s in both their interests to keep crime a business, otherwise they’re both out of a job.”

Regulation should not be pursued at any cost and in such a way, applied like a tattoo only to be regretted when the effect of the alcoholic or love induced stupor that fuelled its creation has gone away.

Has the consumer benefited?

Many may say no.

It would seem that the FCA may be considering that as a distinct possibility

Access to financial advice for the masses has been exterminated. Even if it was freely available in the fiscal sense, there is insufficient capacity to service any more than around 10% of the population based on the recent Heath Report and the FAMR will not correct that imbalance as was intended.

The problem with regulation over the years and as we enter 2018 is that you cannot regulate for lack of common sense, yet that is what we keep trying to do. Caveat emptor has gone at the expense of the consumer rather than in their defence

We have lost the use of that in-built gene of common sense when looking at constructing and applying regulation. Its loss went along with map reading skills, crossing the road after looking both ways, not talking to strangers, proficient cycling, spelling ability, simple mental arithmetic skills, writing, eating with a knife and fork and very many more.

The world has truly gone mad, or at least it has in UKplc’s regulation section.

We have a snowflake society that is now readily and speedily offended on somebody else part for just about everything that simply should not matter as much as it does.

We have borders that are not fit for purpose, we have an NHS in meltdown because the service is now aspiration and expectation based, rather than focusing on the basics of its original 1948 founding principles (comprehensiveness, within available resources) and a country controlled not by UK based elected politicians but by unelected civil servants, quangos, eurocrats and regulators.

To top that we now have ‘Brexit’.

I did say do not get me going so soon!

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The problem with regulation is that you eventually run out of other peoples’ money

Panacea comment for Financial Advisers and Paraplanners

8 Jan 2018

The problem with regulation is that you eventually run out of other peoples' money.

Regulation, we are told, is a vital part of society, it is local, national, European and some cases global yet despite its ever invasive, viral presence in UK society it seems that the more we regulate the worse it gets.

And the regulator in just about every case will claim it is not their fault.

Regulators raison d’être is to ensure that consumers are protected at all times, now verging on protection from themselves.

But regulation is self-perpetuating, a real-life version of perpetual motion that pays a lot of money to those for whom that career path is chosen. Here is some interesting information on FCA salaries.

We all know about the failures of regulation in financial services, but, would UK plc and its population (now commonly referred to as ‘vulnerable consumers’, ‘stressed commuters’, ‘long suffering motorists’ or ‘hard working families’) be better off as a result of much reduced regulatory action.

Should it be replaced with that all important mix of (fast diminishing human attributes that regulation has rendered idle) common sense, caveat emptor and intuitition?

Below is a sample selection of regulators, where I think many reading this would see systemic, chronic confusion, failure, cover ups, unintended consequences and huge spends seeing zero benefit for everyone except those that work in regulation.

There are many, many more.

Electricity regulation: OFGEM is the regulator; their strap line is “making a positive difference for energy consumers”. Deregulation and creating free markets (that in fact now need all this regulation) or the failure of regulators to keep up with fast-moving markets, can become unbelievably costly, as we can all now see. The worldwide electricity sector reforms of the early 1990s have revealed the complexities of introducing market driven reforms and making them work in network and infrastructure industries.

Were we better off pre- denationalization and pre regulation with just one supplier?

Gas regulation: OFGEM again. Ofgem found British Gas incorrectly blocked businesses from switching and failed to give some businesses notice that their contract was due to end. The fine was £5.6m, but really just another large fine that means nothing.

Most complaints about energy companies are about inaccurate, late or unclear energy bills. The Code of Practice for Accurate Bills from the Energy Retail Association sets out requirements for how energy bills should be calculated and issued.

Were we better off pre- denationalization and pre regulation with just one supplier?

Food regulation: That other FSA, the Food Standards Agency. Paris says Brussels and London are dragging their heels over proposals to improve food safety by introducing the labeling of meat in ready-made meals. And only last week we hear that the lamb in our kebabs is chicken or beef. The cost of food labeling compliance in the UK is estimated at £32.5m for just one major retailer.

Were we better off pre-regulation? Were we better off when we did not have supermarkets and fast food outlets, seeing what we brought at butchers, bakers, greengrocers?

Telephone regulation: OFCOM is the communications regulator. They regulate the TV and radio sectors, fixed line telecoms, mobiles, postal services, plus the airwaves over which wireless devices operate.

The regulatory ‘Waterbed’ effect is already well illustrated in the mobile phone industry where regulation fixes the prices of basic products and services only for consumers to see significant increases in the price of peripherals and additional services as a direct consequence.

Were we better off pre- denationalization and pre regulation with just one supplier, the GPO?

Railways: ORR The Office of Rail Regulation are the economic regulator for railway infrastructure (Network Rail and HS1); the health and safety regulator for the rail industry as a whole – including mainline, metro, tramways and heritage railways across Britain; and the industry’s consumer and competition authority.

With rail fares up again in 2018, were we better off pre- denationalization, privatisation and pre regulation with just one supplier- British Rail?

National Health regulation: Now here it get’s really complicated and it is little wonder that healthcare is in such a mess.

In hospitals we used to have a simple management structure, it was called ‘Matron”.

Look at these regulatory bodies, is it any wonder that we see so many problems, with the very simple mission objective being to make people better being thwarted at every regulatory door, often ending it would seem in DBNHS (death by national health service).

MHRA is the government agency responsible for ensuring that medicines and medical devices work, and are acceptably safe.

The MHRA is a centre of the Medicines and Healthcare Products Regulatory Agency, which also includes the National Institute for Biological Standards and Control (NIBSC), and the Clinical Practice Research Data link (CPRD). The MHRA is an executive agency of the Department of Health.

CQC’s The Care Quality Commission (CQC) makes sure hospitals, care homes, dental and GP surgeries, and all other care services in England provide people with safe, effective, compassionate and high quality care, and encourages these services to make improvements.

NICE National Institute for Health and Care Excellence provides national guidance and advice to improve health and social care. It develops guidance, standards and information on high quality health and social care. It also advises on ways to promote healthy living and prevent ill health.

HFEA Human Fertilisation and Embryology Authority is the UK’s independent regulator dedicated to licensing and monitoring fertility clinics and research involving human embryos.

NIHR The National Institute for Health Research is a large, multi-faceted and nationally distributed organisation. Together, NIHR people, facilities and systems represent the most integrated clinical research system in the world, driving research from bench to bedside for the benefit of patients.

PHE Public Health England was established on April 1st 2013, just like the FCA, to bring together public health specialists from more than 70 organisations, including the former Health Protection Agency (HPA), into a single public health service.

PSA Professional Standards Authority for Health and Social Care promotes the health, safety and wellbeing of patients, service users and the public, by raising standards of regulation and voluntary registration of people working in health and care. It is an independent body, accountable to the UK parliament.

Is it any wonder that doing businesses, society and life in general is made more expensive, difficult, confusing and less fit for purpose?

Here, with some help from Wikipedia, is a list of some I may have missed:

Charities

Education

  • Ofqual – Office of Qualifications and Examinations Regulation
  • Ofsted – Office for Standards in Education, Children’s Services and Skills

Environment

Finance

Health

Law

Social Care

Transport

Utilities

PhonepayPlus – regulator for phone-paid services in the UK, part of Ofcom, replaces ICSTIS

Others

EU leaders meet in to discuss ways to improve growth and competitiveness across Europe. Using data from the UK Government’s impact assessments of these rules, Open Europe estimated that the top 100 EU laws cost the UK economy £27.4 billion a year. This was more than the UK Treasury expected to raise in revenue from Council Tax (£27 billion). 
And laws equal regulaton equals regulators.

Those hardworking families are doing so just to keep this lot going.

The unintended cost burdens of regulation in the UK are almost unquantifiable, certainly vast and in almost every case there are grounds to think that life could be simpler, cheaper and more fulfilling if we all took responsibility for our actions, adopted common sense in management styles, business practices, directives and substituting ‘elf and safety’ with sanity.

Time for a rethink?