29th March 2021

Wayman becomes Unsustainable

There is something profoundly wrong with me. Not only have my stars aligned but I am feeling that we are all making progress. No that all my happiness is derived just from potential improvements in advice; I am hugely happy about not being married to Megan Markle for starters.

However, the biggest reason for being so cheerful is that since IFAA and Financial Planners United started their MPs campaign in October last year on the FSCS levy; there has been an increased activity and questioning from Westminster to both the FCA and HM Treasury. Even “Nouvelle Arrivistes” like PIMFA have chimed in. 

No longer can those in regulation or the Treasury pretend that there is not an issue. Last week, my favourite regulator Debbie Gupta has called the current level of FSCS “Unsustainable” and the FCA wanted “to see to it come down”. No manure Sherlock. Isn’t this a tacit admission that regulation has failed?  

We now have them backed into a corner and forced into taking this seriously. So, we must be very wary of straw man arguments, For instance, We have been encouraged to believe that the problem is with phoenixing firms. If only we could get rid of those; the FSCS costs would drop overnight. 

Nope. Not that easy. IFAA has been tracking those advice firms who have been declare in default by FSCS for the last six months and we have discovered that many of the presumed reasons for a firm’s failure have been over stated at best.

There have been 71 declarations in this time and in 42 of them the firm left regulation 3 years ago or more. On that basis we may have another decade before the heritage cases wind down. They are just as likely to go up. 

There is a profound need for a more detailed analysis on how this level of claims has happened, but it is clear that many declarations come from firms that ceased to be regulated before the FSA was renamed and remember, to leave regulation, they needed to be deemed to be in “good order”.

If we are to believe our Treasury Minister John Glen, hordes of the advisers’ clients just love the FSCS so much, that they are delighted that over 10% of their advice fees are devoted to picking up other people’s bills. This is drivel. 

Clients currently see advice as a value proposition. What part of their fees go to what is currently a mystery to them? This level of funding cannot continue for ever. When will adviser and/or their clients simply have had enough. We need to know, where the tipping point is?

There is no sense in waiting to get to that point before we act. We will be issuing a small scoping survey next Monday which will guide us to a bigger work on this issue after Easter.

That said the bigger issues remain. The current regime was designed to fail. Those who feign surprise at its failure simply have not been listening.  

Let us start with the rules. 100,000 pages, vastly more than the Bible, that require a priestly sect of Sadducees (Compliance Officers) to interpret them at great cost. Unhappy with just this, the FCA has overlaid the “Treating your Customers Fairly” concept - a consultant’s job creation scheme and the Senior Manager’s Regime which attempts protect the powerful whilst removing the protection normally offered by the Companies Acts to the smaller player.

Huge funds are devoted to being compliant, but that compliance is precisely no protection from FOS and its fairness police. FOS can decide anything it likes without resort to appeal.  

This brings me to the next reason to be cheerful Part 3. FOS Boss Caroline Wayman is to leave in April. Ms Wayman has been paid over £300,000 pa to oversee a mess of her creation. FOS’s staff rate their employer at 2.8/5. It has 158,000 outstanding cases and no discernible management or governance. 

My rating of Ms Wayman would be significantly less than her own staff and I am delighted to see her go. She has seen herself as the leader of the compensation culture and has taken to herself and her organisation a level of power which is unprecedented in any democracy.

We now need the FOS Board to demonstrate proper management and avoid appointing a permanent replacement until the role of FOS is revised. FOS needs proper management not fairness warriors. Law not opinion. Systems not sympathy. Plus, a more legal way of deciding the larger cases. 

So, what is needed? 

The MP’s campaign is not over. We need to maintain the pressure. The current “fairness” FOS is a very useful tool for sloppy regulators and business-blind ministers. I know of circa 150 MPs that have been contacted under the campaign. Given that historically we tend to contact twice the number of MPs we know about. So we should have sorted 300 MPs, that is less than half of the 650 MPs. For instance, only one Ulster MP has been contacted.

If you and your staff haven’t contacted the local MP use the following model letters to do so. Letter + Guide

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