A new world; a new normal

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Since my last article I have had a trip to France cancelled for the third time – the ferry company now expects to be sailing on the route I want after 20th June.  I’m hoping the crossing I have booked for early July happens, yet this week Portugal was moved to the Amber list and no countries were added to the green list.

With share prices for travel and leisure firms coming under pressure, AJ Bell financial analyst Danni Hewson is quoted as saying “Hopes of anything approaching a normal summer for the industry now look pretty much over.” On the news this morning there were people running hospitality businesses in the Lake District talking about how difficult it is to get staff and some cafes looking to reduce opening hours and the range of goods available.

On a more positive note, Michael O’Leary (CEO, Ryanair) said that he expects unrestricted travel between the UK and Europe in July and August. By the time this article appears in print we’re likely to know whether the pessimists or optimists were right.

This new world is one in which the digitisation of many activities, including many financial services, has accelerated

As financial services firms consider the shape of their operations as the country’s vaccination programme progresses it is worth reflecting on the findings of the FCA’s series of covid-19 surveys. In June last year as the impact of the first wave of corona virus was becoming evident the FCA published a document on assessing adequate financial resources. In the foreword Megan Butler, head of supervision at FCA at the time, said: We aim to reduce the likelihood of market disruption, increase the chances firms can put things right when they go wrong, and minimise harm – to consumers and the integrity of the UK financial system – if they fail and exit the market.

The surveys have identified some 4000 firms which are in financial difficulty and conversations with them on their plans are ongoing. An example of where the conversation hasn’t achieved the desired result is Amigo Loans where the FCA took court action to get their proposed arrangements blocked. The court agreed that the impact on customers was disproportionate compared to that on share and bond holders. Some firms are bound to fail, that would happen in normal circumstances as market demands change and business models don’t adapt.

In April Charles Randell, Chair of FCA, gave a speech entitled ‘Cautious optimism for the post-pandemic world’. One of the key threads was the need for the FCA itself to transform – this summer’s publication of their business plan should give more detail on what that is going to look like.

In the speech he stated: “This new world is one in which the digitisation of many activities, including many financial services, has accelerated. A new world which calls into question the role of towns and cities in our economy, as more people work and shop without leaving their homes.

A new world in which some consumers have become financially more secure, adding to their savings as they have been unable to spend their money, but others have exhausted their savings or fallen further into debt. A new world in which largely unregulated online activity has become a bigger part of our lives, exposing the vulnerable to more and more scams, whether they are high interest rate scams, cryptocurrency scams or bank transfer scams; and where, even with regulated activities, consumers are sometimes only one click away from a bad decision.”

From the speech it is evident that a focus on ‘outcomes’ will continue to be the message from the FCA. Some of this will result in new legislation e.g. to bring Buy Now Pay Later products within the regulated sphere. However, the main aim will be to encourage firms to carry out their own review of their business model, including whether financial resources held are adequate.

As T&C professionals we are affected by these developments in our personal lives as our travel plans get put on hold or as we are targeted by people wanting to invest our money. Genuine opportunities exist to help us with our objectives. Staycation is a much-abused term but a Ted Talk I listened to recently talked about the importance of building good relationships with those around us for our physical and mental health. We don’t have to go abroad to do that, even if the weather would be better if we were able to. Similarly, there has been a significant rise in scamming and phishing since the start of the pandemic and the old mantra of if it looks too good to be true it probably is still holds true.

The firms we work for or with can play a part in two ways: reviewing the products and services we offer to ensure that they provide fair value; and in educating our clients and prospective clients so that they are better equipped to make sound decisions. One firm that I am working with at the moment recognises that, faced with the very large number often produced by a defined benefit scheme transfer value, individuals can get caught up in the sum available today rather than thinking about what it means to their financial security for the rest of their lives. That firm has created an educational tool on their website that provides a clear and balanced picture from which a user can make an informed choice on whether or not to seek advice from third party independent financial advisers.

This focus on outcomes appears to me to be an example of what the FCA would like to see. Towards the end of his speech, Randell says “And on numerous occasions going back over decades, financial regulators have spoken confidently about a new paradigm but haven’t then been able to deliver; so my cautious optimism about the FCA needs to be matched with clear commitments to stating the outcomes we want, measuring these outcomes and being transparent about whether we have achieved these outcomes.” Given the potential influence we have in our organisations I would encourage us to look for the FCA’s Business Plan and use it to guide our training and development plans as our firms face whatever the ‘new normal’ looks like.

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Compliance Cubed Financial services is constantly changing - my passion is helping firms function effectively and in compliance with FCA regulation

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