The chief of a financial conduct regulator is right in the thick of things when a change as far reaching as the retirement income reforms are proposed.
We are promised the views of the Financial Conduct Authority (FCA) soon, though one feels as if the FCA wants to cultivate the image of a regulator in control of things. The reality is that chancellor George Osborne has bowled the FCA a vicious googly.
That paper will surely make for very interesting reading when it does arrive. Could the FCA end up restricting what is after all a dramatic liberalisation of pension income choices?
Liberalisation and conduct regulation strike me as unlikely bedfellows, so the FCA’s inclination may be to restrict things but the political reality may be that it can’t.
Yet within this, there is another risk. For the past decade and a half at least, the story of regulation has been one where the regulator as an institution and regulators as individuals have been guilty of seeking to manage and control things that were easiest to control. Not intentionally but that is arguably what has happened to IFAs and their advice.
The sheer volume of rules and reforms has been extraordinary, though problems unfortunately still arose.
You have to wonder if advisers could do worse than suggest how the FCA could police new income reformsThere must therefore be a risk that advisers find their freedom of action restricted, when the freedom of action of self-selecting investors using an array of execution-only services is not.
That may even be compounded by plans to allow some sort of simplified online advice.
Clearly, there are many shades of grey. People have to take responsibility for their decisions, whatever information they receive, and therefore they may have and expect more freedom. But if the advice sector is restricted in the options it can recommend not by its own principles but by the regulator, and others have a huge amount of freedom, where does that leave us?
In one of his recent statements, Martin Wheatley, chief executive of the FCA, suggested IFAs needed to stop waiting for the regulator before developing offers for the broader market.
I think he is wrong in that. I cannot see what else advisers can do, given the history of regulation.
However, taking a slightly different angle, you have to wonder whether advisers could do worse than to take the initiative and suggest ways in which the FCA could safely police the new income reforms. That would be not just for their sector, but for everyone else involved.
That should go beyond views on guidance and who should deliver it.
It would also mean going a step further than merely considering their own businesses and clients, and instead devising something that sounds consumer-friendly for the whole market.
It might mean advisers suggesting ways in which the regulator can maximise freedom and minimise detriment. Who knows, it might even be secretly welcomed.
John Lappin blogs about industry issues at www.themoneydebate.co.uk
