Financial service firms will have been pleased to hear the City Minister John Glen tell this week’s PIMFA conference that financial services firms represented a core part of the government’s COVID-19 response and that firms have responded very well in their turn.
The minister said: “We asked for a lot from the industry – new products, new easements being put into place. That relies on a rapid turnaround and rolling them out at scale to consumers.
“We have tried to work with the industry to think about potential unnecessary behaviours, such as accessing pensions early and unadvisedly.
“I have immense respect for financial services, and we have to remember in sense those working in financial services have been key workers. Banks have kept their branches and call centres open.”
These are heartening remarks. Glen also strikes me as one of the more thoughtful ministers who does seem to be interested in the job he is currently doing, not the next one he can get, though he is also on to his third chancellor since he became Economic Secretary to the Treasury.
I see signs that in the right circumstances he might be prepared to listen but are the circumstances right?
The difficulty is how to stop him simply reiterating easy Treasury lines, likely provided by his advisers for example that the FSCS is primarily the responsibility of the FCA. (It is true, but only up to a point.)
More generally Glen noted that attention is going to turn to debt and its funding, to the role of capital markets and indeed of retail investors.
He said: “The decisions around the burden of debt is one for the budget later in the year. The fusion of capital markets and consumers working together and retail investors is key. Business will have a lot more debt. There is a lot of work going on across the City and CityUK have put forward some ideas. We will listen to all sectors and land it in the right way,” he said.
If he really wants to involve retail investors, this all depends on the government creating the right investible kinds of vehicle. Maybe there could be something that met the income needs of the older population. Yet it will surely come down to fundamental details – things like how much will long-term Corona bonds pay.
Glen also talked about competition and growth as playing a role in the future of financial services but balanced that with emphasising the need for consumer protection and financial services firms’ holding enough capital.
All those issues are likely to be more salient post the COVID-19 crisis. Yet the terms of the debate don’t sound much different from what was being talked about late last year. That was in the context of financial firms having more freedom after what might be called the full regulatory Brexit due at the end of 2020.
Is there scope in the midst of such debates for advisers to make a plea for reform? Well maybe, but I suspect to really get the ear of the Treasury, they will have to wait until the next phase of the crisis is over. That is likely to come after the end of furlough and perhaps after the next Budget due in the autumn.
However elsewhere in the virtual conference, there were other interesting developments.
Baroness Morgan, a former Treasury select committee chair as well as a secretary of state, suggested there would soon be a Parliamentary debate about how best to protect consumers from unregulated companies and advertising on online platforms. She added that protecting consumers had to be balanced with making sure people were better educated about potential scams.
“The only way to keep the [FSCS] levy on an even keel is to prevent scams and by reducing the number of victims in the first place. Making sure people are educated about scams will be a big part of this and the more that people become responsible for their own pensions etc., the more that will happen.”
She later added: “In terms of unregulated space – I think that regulatory boundary has to be looked at all the time.
“It’s a question of regulatory dialogue and making sure that people are feeding in concerns and thoughts.”
I am not sure if IFAs are natural supporters of moving the boundary for example to encompass mini-bond promotors because it could put even more pressure on the scheme.
It is a complicated situation, particularly in cases where the unregulated touches on the regulated world in the form of introducers or UCIS.
There are politicians, including Nicky Morgan, who do understand some of these details or at least would listen to advisers discussing them.
And if there are Parliamentary debates, it may make sense for advisers to talk to the MPs and Lords they know, so that they get something put on the record in Hansard.
A risk-based levy is mostly a separate issue from the threat of pure scams for example.
Consumer education has its limits in protecting the most vulnerable.
These are important details which if raised in Parliament could (I stress could) begin to influence the Treasury and the FCA.
Yet I wouldn’t get your hopes raised too high. The politicians and regulators are likely to be very, very busy for some time to come.