Regulation rehabilitated

It is probably too early to assess the Wheatley legacy, as he will still be involved with the FCA until at least January, but his reign has been a relatively stable one for advisers, who have had to get used to a different style of post-RDR regulation based more on professional body supervision.

I suspect many advisers will have been relieved that at least he showed some understanding of the intermediary sector and perhaps, too, a genuine interest in financial advice.

So what next for the FCA? This is hard to judge, but if the commentators are correct and the chancellor wanted Mr Wheatley out, as some had predicted would happen if the Conservatives won the election, the likelihood is that the next appointment will be someone more in tune with Mr Osborne’s thinking, so further significant change for the intermediary sector cannot be ruled out.

This could be both a good thing and a bad thing. I would expect to see the FCA’s half billion-pound budget come under scrutiny, and perhaps its salaries too. FCA salaries are far from miserly. – Mr Wheatley himself was on a generous package worth £701,000.

The challenge is how to reduce costs at the FCA but retain talented people in a competitive market. Far from easy. A move out of London would save costs, but when many of the companies the FCA regulates are in the capital this may not be easy. Certainly given the chancellor’s enthusiasm in cutting costs at bodies such as the BBC and government departments, the FCA and its 2,500 staff have so far escaped relatively unscathed.

A big question for intermediaries is how a new regime at the FCA will deal with them. IFAs are, after all, an awkward bunch to regulate, and I do not mean that in an insulting way.

The challenge is how to reduce costs at the FCA but retain talented people in a competitive market

Regulating a fund management company or bank with thousands of staff and perhaps hundreds of compliance staff is a world removed from regulating an IFA business with two advisers and an admin person. Given that the regulation of advisers via the professional bodies seems to be working reasonably well it may in future make sense to separate the regulation of the big and the small firms within the FCA’s remit more clearly, and a new chief executive will no doubt look at the very wide range of firms the FCA regulates and ask a few questions.

The approach may change too. Mr Wheatley has proven himself a thoughtful and imaginative regulator often looking to the future. He particularly caught the mood when he suggested robo-advice could be one way of tackling the advice gap, something the FCA has done little to tackle.

The increasing use of technology in the financial advice sector, and its positive – and potentially negative – uses will be something his successor will need to look at. I would expect greater use of electronic monitoring of advisers now that so many have shifted to platforms and other online tools.

A new chief executive will need to be a little more political too. The FCA has stumbled a few times, for example when a proposed investigation into insurance companies’ funds was leaked early, causing millions to be wiped off insurance company share prices. It was not handled well by the FCA, and insurance companies are still smarting from that incident.

One political issue for the chief executive is what happens to the millions of pounds in fines the FCA is now collecting. The government has indicated it believes much of the windfall from fines should be ring-fenced for charities and the like and not used to reduce the cost of regulation, but is that a sensible approach?

Whatever the style of the new chief executive I suspect that advisers no longer see regulation as the thorn in their side they are used to. It is interesting to note now that many of the advisers and financial planners I meet rarely complain these days about regulation being oppressive, a common complaint in the past. Yes, the fees are too high; yes, the regulator is remote – but it does at least usually handle regulation in a professional, respectful manner, and most advisers find that regulation is just another routine part of running their businesses, not a constant headache. They are more interested in expansion, technology, finding new clients and the like, and rightly so.

So while the regulator may not be perfect, it is more balanced and fairer, at least to small firms, than it once was, and Mr Wheatley should take some credit for that.

His successor will need to build on this foundation and avoid the temptation to rewrite the rulebook on day one. Advisers will thank him – or her – for it.

Kevin O’Donnell is a financial writer and journalist

You said

4l0LmAkAYI, responding to the quote from FCA executive Tracey McDermott to the effect that a good regulator should be like a good football referee (FA, 30 July):

“Referees do not set their own fees and are accountable for their actions. Moreover, when they cease to be referees they do not as a matter of course walk from a highly-paid employment into even more highly-paid employment with the clubs they were previously refereeing games for. That could lead to all kinds of suspicions of abuse.”