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Holly Cook: At Morningstar's Investment Conference, I spoke to Clive Adamson of the Financial Conduct Authority, formerly the Financial Services Authority, and I asked him what lessons has the new FCA learned from the old FSA? Here's what he had to say.
Clive Adamson: It's a really good question. As I was trying to get across in the conference, I think there are two or three absolute key lessons for us. First is that in the FSA, we were such a broad regulator, we tended to oscillate between prudential regulation during certain periods and conduct in the other. The benefit of the FCA is a single regulator focused on the conduct agenda. We are able to maintain a consistent and predictable approach, so that's lesson one.
Lesson two is that the FSA in the conduct supervision regulation was generally a reactive regulator. That means tending to identify things after they had happened and fix some after they've happened. That has imposed very large costs over many years both from firms, consumers, and the economy as a whole. So actually a key lesson for us is that being a reactive regulator just doesn't work and we have to move towards being a preemptive regulator.
Cook: Indeed, one of the things that you were saying in your presentation is you were appealing to our audience of advisers for their help in sort of providing intelligence on what's going on in the market. But given the events of the last sort of five, six years, how can you go about actually restoring confidence in the consumer?
Adamson: It's absolutely in our view essential to have a well-functioning economy; consumers have to have a higher level of trust and confidence in financial services, as largely we’re seeing has been a banking problem, but before that is insurance problem and advisory problem, et cetera. So our view is that if we can do our job well, and if we can generally engage with the industry, and get the industry to change how they behave and run their businesses, by those actions, because it occurs through actions, that over time will lead to a restoring of trust in financial services.
Cook: So you were explaining what you want to do as the FCA, but as one of our delegates pointed out, it is the same people in the organisation so how do you go about ensuring that those people who've become used to one way of approaching the situation, take on a different ethos.
Adamson: In reality it's a journey for us, so we have been preparing this for the past two years or so. We have been retraining our staff. We've been hiring different sorts of people, but in essence it's about a different mindset by us. So it's not about process change for us, it's about mindset; how do we get our people--which we are doing--to think about pursing the interest of the customer and consumer in their day-to-day supervision of firms? And as that engagement, over time firms will see different and that's how we're going to do it. It's a challenge for us, we recognise that, and in particular we are asking industry to change substantially, and that is not going to happen just by itself. It's going to happen by us having the right level of engagement with firms, the industry as a whole, but that is about mindset for us.
Cook: Well, I think I can speak for everyone when I say that we hope that this will be an improved situation and that the consumer will have that sort of transparency, and let's see how it plays out.
Adamson: Okay.
Holly Cook: Thank you very much.
Adamson:Thank you.
