The Three Certainties of Human Life are Death, Taxes, and more regulation

The Three Certainties of Human Life are Death, Taxes, and more regulation

“The regulator has found concerns over value for money in drawdown, including significant variance in charges, which can be complex, opaque or tough to compare, so has set out plans to force firms to show a one-year charge figure in pounds and pence in the key features illustration they provide to consumers”.

It is a commercial world out there and I can think of no other industry that has a regulatory insistence that charges for what they make/ build/ sell have to be granularly declared.

When you buy a new house, is there a breakdown of building and material costs supplied with the contract? The same with a new car: design.testing, parts and labour. A prescription drug does not come with a breakdown per tablet for research, development and testing, a holiday cost does not breakdowns for flights, hotels, food, drink or flight. Supermarkets do not declare what the business costs are for selling you a pack of sausages.

A bit simplistic I know but if regulation stops messing with fixing what in many cases is not broken and more people use a financial adviser, the world of independent advice and consumer trust may be a better place.

As an owner in the 1970’s of a waterbed (with the attendant life affirming fond memories) the illustrative metaphor of the movement in a water-filled mattress seems to be a common sense albeit simplistic description supported by a little known mathematical formula called Bode’s Sensitivity Integral.

Bode’s waterbed theory ‘outcome’ is already well illustrated in the mobile phone and utilities industries where regulation and political interference fixes or manipulates the prices of basic products and services only for consumers to see complicated pricing structures ensue by way of significant increases in the price of peripherals and additional services as a direct consequence.

Thiseffect is a phenomenon that should increasingly cause concern to those who regulate the industry and those it regulates in regard to pricing and the detriment the post RDR world has wrought upon the intended beneficiary- the consumer.

It is the natural but not necessarily intended potential to squeeze one part of a complicated and complex regulated business model (and the attendant regulatory processes) to cause a serious bulge elsewhere in the process.

So, the theorising in RDR should have foreseen that in achieving:

  • the elimination of bias in the market
  • ensuring the adviser is the true agent of the consumer
  • clarity over the costs of advice
  • and various other factors,

the industry would no doubt see the bulge appear somewhere else.

And this has been seen in costs in every conceivable way and particularly for consumers.

Cost is something that FCA regulation incurs for firms, often with little thought of logic or affordability and with little benefit analysis being done on the consumer impact and detriment it created.

So how else did the theory manifest itself?

In ensuring the adviser is the true agent of the consumer, the result was that the mass-market consumer did not, does not want to pay for advice that had previously been seen as free.

When a consumer is able to obtain lower prices from an adviser or a provider for drawdown, is it possible that other consumers will have to pay more for the same input from another adviser or provider firm as a result?

Is this bad for consumers?

The asymmetric exercise of regulatory or consumer power can lead to consumer detriment through raising other consumers’ advice and provider charges- the Waterbed effect.

While a large and powerful provider firm or distribution channel improves its own terms by exercising its market power in getting cost reductions, the terms of its lesser resourced competitors can deteriorate sufficiently so as ultimately to increase the average price of advice – the Waterbed effect.

It seems to me that the only organisations in the world of financial services that should raise serious “concerns over value for money, including significant variance in charges, which can be complex, opaque or tough to compare” are the FCA, FOS and the FSCS. 

We never see a breakdown of costs, budget breakdowns yes but costs????

IFA Antony Cousins at SPF rightly comments that “value for money has always been important to clients, however with returns from financial products expected to be lower over in the short to medium term, the level of charges are now even more relevant.  For many years Financial Advisers Fee Agreements have had to specify the exact service(s) being provided and the associated initial and ongoing cost in pounds and pence, hence I see no reason why providers illustrations for drawdown should not follow this model”.

He goes on to note that this should be“coupled with an educational programme to enhance customers understanding of a highly technical area would remove some of the scepticism in the industry”. 

There is some suspicion that the FCA are more concerned about clients going direct to providers in this drawdown market and not taking advice where we have to stipulate and review all these costs.

Regulation has created a race for the bottom on price. I am not sure that the average consumer ‘buys’ financial advice on the cheapest cost. I think that for the mass market consumer it could be about not paying anything at all as they see the pension plans providers they have been invested in for years should provide that advice for free.

This is in turn a problem for providers who are predominantly distributing their products via the intermediated channel. They do not want to carry out work, with added customer care regulatory liabilities or redress, that they see, is an IFAs role. But if the client has either been disenfranchised by RDR segmentation or just does want to pay what else can be done.

Waterbed effect at work again????

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Will GDPR destroy businesses?

Will GDPR destroy businesses?

The date is upon us.

GDPR was a cunning plan thought up by the EU. Europe’s data protection laws have long been regarded as a gold standard all over the world. But over the last 25 years, technology has transformed our lives in ways nobody could have imagined so a review of the rules was needed.

In 2016, the EU adopted the General Data Protection Regulation (GDPR), one of its greatest achievements, they say. It replaces the1995 Data Protection Directive which was adopted at a time when the internet was in its infancy.

The GDPR will be recognised as law across all the EU member states today, the 25thMay 2018.

But will it actually see the destruction of many businesses. Mailing lists and research data built up over years may be rendered useless if those businesses do not have consent to keep in touch or hold that data?

Companies are worried about the impact non-compliance could have, many fear that negative media or social coverage could cause their organisation to lose customers and they are very concerned that their brand image, built up over very many years, would be de-valued as a result of negative coverage.

Although this is an EU directive, it also affects businesses globally who interact with European customers seeing some applying blocks for their customers in the UK and Europe. American news websites including the New York Daily News and Los Angeles Times are among those which have temporarily shut down in Europe along with many others who sell goods online to the UK & Europe.

The privacy of the individual is hugely important, especially when set against the intrusions of governments. GDPR is potentially putting the brakes on innovation and risks punishing companies for situations beyond their control.

There are some ironies too. The EU wants to give individuals unfettered access to the data that companies store about them. Yet the EU is not transparent about its own operations, including the voting records of MEPs and the lobbyists who try and shape EU policy in their favour.

GDPR takes little notice of how data is a vital raw material of product and business innovation. It is likely to stifle data-driven innovation as well as helping to reduce operational costs.

Rather like a lot of regulation in the UK, learnings only come when it is way too late. In this case let us hope that businesses, especially smaller businesses can survive the impact of GDPR, both seen and unforeseen.

As a footnote, this is the most perfect opportunity for scammers to use GDPR as a way of getting you to click on a link in a phishing e-mail that you shoud not. DO NOT click on any e mails where you do not recognise the sender or the address it purports to come from.

Stinking badges 3

Panacea comment for Financial Advisers and Paraplanners

23 Feb 2018

Stinking badges 3

For those of you who remember the Mel Brooks classic ‘Blazing Saddles,’ the town of Rock Ridge was being held to ransom by out of control Mexican bandits who proudly proclaim to the Mayor, Hedley Lamarr, that in a town with no sheriff, to cause havoc they “don’t need no stinking badges”.

So fast forward to the 21st Century where Rock Ridge is now ‘policed’ by the new bandits in town- Claims Management Companies (CMC’s)

Wheels turn slowly, but those who recall our campaign, with Alan Lakey, on the regulation of CMC’s will note some very positive ‘outcomes’ after a number of meetings with Kevin Rousell, Head of Claims Management Regulation Unit at the Ministry of Justice.

Kevin recently let me know that the House of Commons was working on the FINANCIAL GUIDANCE AND CLAIMS BILL [LORDS] Public Bill Committee: 25 January 2018.

In ‘Blazing Saddles’ parlance, Bart has just ridden into town.

There is an amendment which inserts a provision into the upcoming Privacy and Electronic Communications (EC Directive) Regulations which prohibits live unsolicited telephone calls for the purposes of direct marketing in relation to claims management services except where the person called has given prior consent to receiving such calls.

Do read the whole bill but in particular section N6 which states:

Financial Guidance and Claims Bill-[Lords], continued

After regulation 21 insert—

“21A Calls for direct marketing of claims management services

  1. (1)  A person must not use, or instigate the use of, a public electronic communications service to make unsolicited calls for the purposes of direct marketing in relation to claims management services except in the circumstances referred to in paragraph (2).
  2. (2)  Those circumstances are where the called line is that of a subscriber who has previously notified the caller that for the time being the subscriber consents to such calls being made by, or at the instigation of, the caller on that line.
  3. (3)  A subscriber must not permit the subscriber’s line to be used in contravention of paragraph (1).
  4. (4)  In this regulation, “claims management services” means the following services in relation to the making of a claim—
    1. (a)  advice;
    2. (b)  financial services or assistance;
    3. (c)  acting on behalf of, or representing, a person;
    4. (d)  the referral or introduction of one person to another;
    5. (e)  the making of inquiries.
  5. (5)  In paragraph (4), “claim” means a claim for compensation, restitution, repayment or any other remedy or relief in respect of loss or damage or in respect of an obligation, whether the claim is made or could be made—

(a) by way of legal proceedings,

(b) in accordance with a scheme of regulation (whether voluntary or compulsory), or

(c) in pursuance of a voluntary undertaking.”

Readers may wish to refer to “Stinking badges 2” from August 2016.

It is well documented how claims management companies have plagued this industry in recent years.  Many of these have lied, cheated, deceived and generally operated in a base and underhand manner.

Alan noted “The Ministry of Justice unit at Burton on Trent had been unable to deal with the excesses in a sensible manner and when foul behaviour has been determined the response is often the equivalent of a slapped wrist and a bad telling off. 

Hopefully this bill will sound the death knell at long last for this legally assisted parasite that feeds off the world of financial services.

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!

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?

The conundrum of Robo Responsibility

Panacea comment for Financial Advisers and Paraplanners

21 Nov 2017

The conundrum of Robo Responsibility

Earlier this month Professor Stephen Hawking issued a chilling warning about the imminent rise of artificial intelligence. During the new interview, Professor Hawking warned that AI will soon reach a level where it will be a ‘new form of life that will outperform humans.’

There is a move afoot to bring the delivery of financial advice into the 21st century. After all with the smart phone, tablet and virtual reality all breaking through boundaries, why should financial advice not find itself in the vanguard of change?

It should work, could work, but will not work until something very simple yet clearly requiring a considerable volte-face takes place.

So, here’s a thought for you lovers of Steve Jobs and even Ned Ludd.

This may take a little of your time but bear with me please.

Steve Jobs reckoned that “Older people sit down and ask, ‘What is it?’ but the boy asks, ‘What can I do with it?”.

Smart technology exists and is readily available in the average home. Algorithm based analytics are there, right now, to deliver for the mass market an automated method of providing the average family with the ability to self medicate their financial ailments and prescribe a solution.

This happens in many areas of web based life today so why not financial services?

The elephant in the room of progress is the word ‘advice’. Because in the financial services world where products are delivered/ sold/ distributed by the intermediated channel the buck of responsibility always stops with the financially weakest part of the process, the advisory firm.

Product failure, rather like design failure in modern airliners, is unheard of. With an airplane the crash blame is pretty much always directed at the pilot.

Robo or automated solutions should work, it is all in the ‘math’? Very complicated algorithms drive the customer to a very specific outcome.

This is where it gets complicated because at the moment should the algorithm prove in five, ten or fifteen years to have had an unforeseen glitch regulatory retrospective retribution will rain down on the advisory firm, not the maker of the programme.

There is a simple solution to a complex problem.

That is to have the algorithms certified as fit for the purpose they were designed for.

Fit for purpose accreditation already exists in other areas of regulation. Aircraft cannot fly in UK airspace without CAA approval. Drugs are certified as fit for purpose and prescription with the Medicines & Healthcare products
Regulatory Agency.

So why can the FCA not approve automated advice models as fit for purpose?

The answer according to Andrew Mansley at the FCA, who I spoke to at some length at the PFS Festival, is that it would be “anti competitive”.

What!!!!!!

There are examples of this statement being used to create chaos and detriment in this industry. The Maximum Commission Agreement springs to mind. For those new to the world of financial services this is an essential read

For those with not enough time served in this industry, you should know that from the late eighties increased commission levels from larger distribution channels were being sought after the OFT got rid of the Maximum Commission Agreement (MCA) as it was seen to be anti-competitive.

I suspect the real reason would be that, in the words of Hector Sants, not known to Mr. Mansley, “if the regulator was to take responsibility for it’s actions, nobody would want to do the job”.

The FCA needs to consider the following simple steps to improve the embrace of automated opportunities.

  1. All robo models should apply to the FCA for approval, that approval will certify what the programme can and cannot do and rather like a fully automated vehicle
  2. The FCA approval will apply to the algorithms and the programme
  3. Any changes, upgrades would require a certification upgrade
  4. The robo technology would require PI cover for any unforeseen failures and not the adviser firm
  5. The advisory firm would NOT be responsible for any advice/ guidance failure of the robo programme as part of the FCA sign off
  6. In October last year, Professor Stephen Hawking warned that artificial intelligence could develop a will of its own that is in conflict with that of humanity. With this in mind, the advice responsibility buck stops with the technology provider and not the adviser

 

Put these in place and both the regulator and the software house would think very carefully about failure, the adviser could engage with more consumers with confidence restored.

We can always dream?

In the business of crime there’s two people involved

Panacea comment for Financial Advisers and Paraplanners

13 Oct 2017

In the business of crime there’s two people involved

It was during this same month six years ago that I first read with some dismay, but an overall lack of surprise, that the then FSA had opted not to license or pre-approve financial services products, due to what it claimed were a “lack of resources”.

I’m sure I don’t have to remind anyone reading this that back in 2011 the consumer had already faced considerable detriment as a result of financial products such as PPI. And the regulator’s helpful response almost every time was to point out flaws in product design, marketing or understanding of the product – all with the benefit of hindsight.

Fast forward to 2017 and the same issues rumble on as a result of the regulator’s inaction to preapprove products before they are made available to consumers. Around this time last week, for example, the news broke that the FSCS had begun accepting claims for bad investment advice in relation to a failed property scheme Harlequin.

Anyone invested in Harlequin would have, at first, been deemed ineligible for FSCS compensation as the product would have been considered a direct investment. But the FSCS reviewed this position and found new evidence that the Harlequin products likely fall under the banner of unregulated collective investment schemes (UCIS), which qualifies them for FSCS protection. The FSCS is also already paying claims against firms for bad mortgage advise and pension switching, if the underlying investment was in a Harlequin resort.

If I’ve said this once I’ve said it a hundred times and I’ll keep doing so in the hope that one day the regulator will finally see the light: regulation should not be about being wise after the event. It should be about utilising experience when things going wrong to make sure mistakes and failures do not happen again. To licence a product as fit for purpose, with that purpose clearly defined, as part of the regulatory process is the surely best way of achieving this? I’d even go one step further to say it’s the single most effective consumer benefit a regulator could put in place.

The situation with Harlequin, and most other examples for that matter, are always about the advice and not the product. The FCA has been careful to point out that any adviser recommending Harlequin was expected to have carried out thorough due diligence on any Harlequin investments “to fully satisfy themselves that it is a suitable investment”.

In no way aim I suggesting due diligence isn’t a crucial part of the advice process but let’s consider a slightly different approach for a moment. If products were regulated from the outset, and advisers regulated by the FCA were not allowed to engage, at all, with unregulated products – commission paying or not – problems and losses such as this would not happen. And crucially, the tab would not have to be picked up by the FSCS.

I’ve been suspicious for a long time now that the FCA’s decision back in 2011 was really nothing to do with resource and instead was all about responsibility and, ultimately, who the finger points at when things go wrong. Sadly, this latest development in the Harlequin case only confirms my suspicions yet again. It seems that without something to bash the regulator would perhaps feel it has no purpose, or as Keith Richards of the Rolling Stone’s, not PFS, once said of the policing system, “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.”

Some have suggested that the resource needed by the FCA to pre-approve products would have resulted in a huge increase in fees. But then there’s the alternative, logical, argument that perhaps if products were licenced there would be fewer failures to fund? Just a thought…