Face to face with the FCA 

On a functional level, much has improved over the years, in terms of the FCA's model of regulation.  Whilst, no doubt, the regulator reserves the right to follow a more prescriptive, rules-based approach, it now prefers to roll out a more nuanced, proportionate framework for firms such as ours.  Whilst there are still signs of some assumed models that don't necessarily reflect how firms operate in practice, it is extremely encouraging to see the developing emphasis on risk-management, corporate governance, financial capacity and future-proofing.

In 'the old days', when ValidPath commenced operating, back in 2002, it was possible to speak to a designated contact person at the (then) FSA.  One could pre-emptively run processes and compliance frameworks past such a person, and receive reasonably coherent guidance as to the acceptability of the same.  Various regulatory reforms consigned that idea to the dustbin of history, for most firms, and now the responsibility lies on us to be proactive, to keep on top of the constant flow of regulatory updates and reforms, and to continually adapt and improve what we are seeking to do.  Our practice is to maintain an ongoing conversation amongst our team here at ValidPath, focused on controlling known or predicted risks, and improving outcomes - for our Members and their clients.

And whilst that approach cannot guarantee perfection in compliance terms, experience to date indicates that we have developed a culture which is suited to anticipating the kinds of emphasis that the FCA deems to be significantly important.  The evidence for this comes out of our involvement in the regulator's roundtable discussions for Networks, and also when we participate in one of the periodic Regulatory Reviews that now form the mainstay of the FCA's supervisory approach.  We've been through one of the latter recently, and found it a very positive and helpful experience.

It has been encouraging, therefore, to see the FCA explicitly talking about "looking at the culture and business practices of each firm" because, for a long time, we have felt (strongly) that these things matter far more than being able to tick boxes for Britain in the Olympics.  Of course, we'll never entirely escape that kind of culture - for one thing, intermediaries have become so ingrained in the practice that it almost feels unsafe to do anything else.  In what kinds of ways does 'the right culture' make a difference?  Without wishing to sound too pretentious or patronising, I suggest the following:
  • Never assume that there is anything we do which can't be improved - somehow
  • Put ethics first in line, before all the other considerations that we'll inevitably end up juggling
  • Have a zero tolerance policy in relation to conflicts of interest
  • Find ways of demonstrating value to clients - if you can identify what it is, then you'll know whether or not you've delivered it
  • Value all the personal connections we create, not just the client who pays the bills
  • Build a value proposition for clients which is so convincing that they'll have no qualms about paying your fees!
Kevin Moss, 24/07/2014