While the politicians continue to be distracted – to say the least – by the all-encompassing task of delivering Brexit, we can at least be grateful that our regulators are already thinking about the world beyond it.
Former FCA chairman John Griffith-Jones once told a City audience: “If the politicians weren’t running the [Brexit] process, I think we could get to an agreement for financial services really quickly.”
What Griffith-Jones was getting at was the view that the regulators, free of the constraints imposed by political considerations, were often better placed to get straight to the heart of an issue.
In that same vein, I was delighted to recently welcome Chris Woolard, FCA director of strategy and competition, to Cicero Group for a keynote speech on the future of regulation.
Woolard’s speech acknowledged that Brexit had created the opportunity for the UK to think about how to do regulation differently, but he was clear that the driving considerations on the need for a different model of regulation went well beyond the B-word.
There are a range of factors with which the regulator is grappling: changing consumer need and expectations; the effect of long-term low interest rates; the gathering pace of innovation and automation; intergenerational change; and the increasing complexity of the choices faced by consumers in areas such as pensions.
Woolard cited the example of the pension freedom reforms. Where pension saving was once for many a matter of joining a company with a defined benefit scheme that would pay a generous ‘wage in retirement’, consumers increasingly need to make complex choices about the schemes they are in and what they will do with the savings when they enter retirement.
The regulator is concerned about the proportion of savers navigating this complex landscape without seeking advice. Woolard described how, rather than take a light-touch approach and wait for problems to emerge, the regulator was trying to head this off with a far more radical solution, in the form of ‘investment pathways’.
This will mean non-advised customers being offered a range of investment solutions that broadly meet their objectives. As Woolard said, customers “don’t care if a set of rules has been followed – they care about the outcome they receive”.
Although the speech was about the ‘future of regulation’, this shift in emphasis is already happening. This agenda will continue to be fleshed out in the coming months as the regulator consults on the duty of care for firms.
Even as the Brexit battle rages on, our regulators are already thinking about the challenges currently being faced by consumers and industry.
Iain Anderson is Cicero chairman