OpinionMay 22 2013

Regulation is a vital point

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While I fully endorse all he had to say, I regret that he stopped short of diagnosing the growth of regulation and its impact on advisers and the public.

It is apparent that the regulators’ priorities were rather different from those initially envisaged –their preoccupation was to devise an ever-rolling schedule of projects and interventions to keep them busy forever.

The result of so much regulation is that the surviving players in the industry have become giants, many of whom are under foreign ownership and are run by people who are no more wise and knowledgeable than the best small IFAs were 40 years ago. Mistakes continue to be made but now they are made on a gigantic scale and the regulators’ shortcomings are being brought into full public view.

Mr Davy referred to financial engineering leading to damaging toxic outcomes, seemingly unaware that this is a survival response to the costs and pressures of regulation. Simple products are far more easily regulated than highly complex ones. Also, if regulation is going to destroy a company’s ability to profit from its marketing stance, it will change course and seek to profit from marketing complex schemes to millions of people regardless of suitability.

Furthermore, now even big companies are refusing to give regulated advice, forcing the public to take their chances like in the days before regulation.

Younger readers may suppose all this is only clear in hindsight. Let me assure them that many who knew Ken Davy saw what was coming in fairly detailed terms and publicised their views widely but in vain.

The sad result of this looming financial calamity is that the great majority of the population most in need of friendly financial guidance either can no longer get it or cannot afford it.

Philip Binding

Binding & Williams Associates