Regulatory costs are high in part because the financial services industry - including elements of the advice sector - have to be “dragged kicking and screaming instead of doing the right thing”, according to the chair of the Financial Services Consumer Panel.
Speaking to FTAdviser, Sue Lewis cited the Retail Distribution Review as an example where the industry needed to be dragged “kicking and screaming” in some contexts before the regulator forced it to act.
Ms Lewis noted that the Financial Conduct Authority followed up the RDR with reviews and found that firms were breaking rules by not disclosing costs properly, as well as taking ‘in kind’ inducements.
In April, the second of three thematic reviews into firms’ adoption of the RDR principles since they were implemented in January 2013 revealed continuing ‘disappointing’ results suggesting that firms are still not being clear enough in particular on how much their advice will cost.
Ms Lewis said the consequence of such reticence, which is evident across the financial services sector from banking to brokers and beyond, is that the FCA is forced to conduct reviews or intervene through lengthy - and expensive - consultation on fresh rules.
She said: “Making rules takes a long time its expensive, and the more and more rules you get the more expensive regulation becomes. Consumers pay for it so I just think why don’t they [firms] just do it instead of fighting it all the time.
“Are the industry doing things before the regulator forces them to do them? And by that I mean it almost seems like they have to be dragged kicking and screaming instead of doing the right thing.
“Firms are saying ‘Oh well we haven’t had very long to do it’ - well actually they did - they knew this [the RDR] was coming for years. They kicked and screamed and resisted it and now they are trying to find ways around the rules.
“I’m generalising but the fact is there shouldn’t be any ‘why are they doing it?’ at all. The rules are the rules and they are there for a purpose.”
Last year the Association of Professional Financial Advisers called for a regulatory dividend for advisers, who make a small proportion of complaints to the ombudsman. Earlier this year it published figures showing a regulatory cost burden of £170 a year per advised client.
Ms Lewis would like to see more transparency from the industry too, stating that putting consumers at the heart of business means “working out what customers want and need rather than selling what they want to sell”.
She said: “It means being transparent - by that I mean more generally being upfront about costs, not burying things in terms and conditions which are 50 pages long, and handling complaints quickly and fairly.”