A Game of Chess: Navigating the Regulated World

A Game of Chess: Navigating the Regulated World

Working in a regulated environment often feels like a strategic game of chess. To "win," you must not only understand your opponent but also grasp their strategies and motivations. This analogy rings especially true when dealing with regulatory bodies like the Financial Conduct Authority (FCA).

The Role of the FCA: Not Just the Opposition

There is a fair share of criticism directed at the FCA, some of it warranted. However, the key to understanding the FCA lies in its fundamental aim: protecting consumer outcomes. Will they always get this right? No. Are they sometimes reactive? Absolutely. But if you view their actions through the lens of a chess game, you start to understand their moves. Their ultimate goal isn't to stifle businesses but to safeguard consumers.

A Lesson from China

Looking at China’s approach to reform, it's clear that while some actions might seem harsh or overly restrictive, there’s often a positive intention behind them. Take, for instance, the overhaul of the educational system, moving from private tutorials to state-funded, non-profit services available nationwide. Similarly, the country’s restriction on the time under 18s can spend playing online games, though controversial, stems from a desire to protect youth. These measures, like regulatory changes in the West, can be debated, but their underlying principles often aim to promote the greater good.

Understanding Consumer Duty

Consumer Duty has been a hot topic in the financial world. Two common complaints I've encountered are:

1. The burden of Consumer Duty forced me to sell my business.
2. Consumer Duty is making me cut my charges.

The essence of Consumer Duty aligns with the mission of most financial planners: putting the client at the heart of the business. The introduction of this duty emphasises the importance of business intelligence (MI data) in ensuring that clients truly are the focus. Many companies already possess the necessary data and act on it, but Consumer Duty formalises this process, benefiting both clients and businesses.

When it comes to fees, the discussion often centers on value. Financial planners who struggle with Consumer Duty usually find it difficult to articulate their value proposition, leading them to cut fees as a quick fix. However, the real issue lies in demonstrating the value they offer. Here again, the chessboard analogy is relevant: ensuring consumer outcomes are positive is a win for all involved.

Decumulation: Overcoming the Overwhelm

Starting my journey into the world of decumulation felt overwhelming. New products are constantly introduced, supposedly to "help" financial planners. However, a careful review of the FCA’s expectations reveals that the goal remains consistent: protecting the client and, by extension, the business.

In my experience, road-testing a CRP process with a financial planner showed that most of what the FCA expects is already in place; the challenge lies in documenting these practices effectively. This mirrors the Consumer Duty experience, where businesses often already meet the requirements but need to formalise their processes.

Finding Solutions: More Than Just a Checklist

When I founded Money Wise UK®, I initially struggled to define our identity. The financial services industry often expects providers to offer ready-made solutions, but I found success by flipping this approach on its head. Instead of prescribing solutions, I focused on understanding each business's unique challenges and determining if and how I could help. Sometimes, the best solution was directing them to someone else better suited to assist.

The key takeaway is that solutions must be tailored to the specific needs of a business. Off-the-shelf vulnerability solutions or consumer duty analytics can sometimes do more harm than good if they don’t address the actual needs of the company.

The Endgame: Taking the King