The “sheer volume” of new rules coming from the EU over the next 12 months will create issues for compliance, systems and management functions, admitted the Financial Conduct Authority’s chairman John Griffith-Jones.
Speaking this morning at the Wealth Management Association’s annual summit, he said that this creates a “painful timeline” and “cannot be a sustainable framework for the future”.
Echoing comments made by the regulator’s acting chief executive Tracey McDermott last month, Mr Griffith-Jones agreed that firms should not be expected to spend so much of their time dealing with regulation.
He also mentioned the news earlier this week that the incoming Mifid II changes look set to be delayed by as much as a year due to technical challenges, stating that this was a “sensible” measure but defending the new directives as having merit and being well designed.
“These regulations are probably too much, but they have to be done,” Mr Griffiths-Jones added.
Moving on from those things that have to be done, he outlined some of the things that the FCA actively wants to do, mentioning the latest ‘sandbox’ proposals coming from Project Innovate, the Effective Markets Review and Financial Advice Markets Review, the latter of which was delaying another review into the Financial Services Compensation Scheme’s funding.
“There is a genuine desire to have a better relationship with the wealth management industry,” Mr Griffiths-Jones said.
“We have learned that reactive regulation is extremely low value add and of little use to the general public, so we must better anticipate issues that might go wrong and be more fleet of foot in dealing with them.”
Finally, he laid out some industry requirements, reiterating the FCA’s desire to see firms really knowing their clients, giving quality advice and using appropriate disclosure.
“The need for consumer protection has only increased since the pension freedoms were introduced, there’s an inevitable complexity, an asymmetry of knowledge between client and adviser, plus a legacy of products designed to benefit providers,” stated Mr Griffiths-Jones, adding that the winners will be those that keep up with good conduct for themselves.
“The more valued and trusted your service, the less regulatory scrutiny you’ll need.”
peter.walker@ft.com
