Almost exactly 30 years ago, I wrote a piece for Money Marketing that related how Scottish Amicable, the life office eventually taken over by the Pru, had asked advisers to dob in peers they believed were misselling financial products to clients, either directly to the regulator or to Scottish Amicable itself.
Such a public stance was seen as so unusual back then it merited a splash on the front of the paper — to the disgust of many advisers, I recall. The perception among some who wrote to me was you shouldn’t snitch on a colleague, no matter how bad they were.
Still, a lot of water has flowed under the bridge since then. Whistleblowing is commonly accepted as being necessary, even positive.
Advisers and consumers deserve better from their regulator — and quickly
Reading through Money Marketing, it is possible to see advisers taking seriously their duty not only to their own clients but also with a wider moral understanding of how the industry should behave towards consumers.
Virtue signalling
As for the regulator itself, the Financial Conduct Authority now makes a virtue of how it investigates tips from various sources. Its Whistleblowing Qualitative Assessment Survey for 2022, published in May this year, shows between April 2021 and March 2022 its team received and assessed 1,041 whistleblower reports, involving 2,114 separate allegations.
The allegations related to subjects including the fitness and propriety of approved persons, treating customers fairly, breaches of the Financial Services and Markets Act 2000, cultural concerns within firms, compliance failings and fraud. At the same time, the FCA assessment found widespread dissatisfaction with both the whistleblowing process itself and the outcomes in terms of how the information was acted on.
For advisers who want to do the right thing, whistleblowing usually leads to disappointment
The regulator went back to 68 of those who had blown the whistle on things they’d observed and asked how they felt about the outcome of their action. Intriguingly, only 21 fully completed survey replies were received; a tiny 31% response rate.
Of those, two-thirds were somewhat or extremely dissatisfied with the response they had received. The prevailing view of those who responded to the survey was they did not feel there had been enough dialogue with them to ensure their concerns had been understood. They perceived the FCA as “reluctant to act and this reluctance was preventing [the regulator] from thoroughly investigating reports”.
The problem for advisers who want to do the right thing is whistleblowing usually leads to disappointment. And the evidence suggests very little has changed on that score over the past few years.
Advisers who whistleblow are the finest of their profession. Their knowledge and insights can shine a powerful light on the misdeeds of others
In the British Steel pensions scandal in 2017, many advisers were involved in trying to represent the interests of pension fund members. Yet we know almost 8,000 steelworkers had transferred out of the British Steel Pension Scheme by the time the FCA got its act together.
In the case of discretionary fund manager Beaufort Securities, which collapsed in 2018, we know an adviser alerted the FCA to allegations against it in 2016. Again, nothing was done for two years.
West Riding Personal Finance Solutions managing director Neil Liversidge wrote to the regulator in 2015, warning it about London Capital & Finance (LCF) and stating its investments were not suitable for an “unsophisticated retail market”. His warnings — and those of colleagues who also wrote in — were not heeded until it was too late. LCF went under in 2019.
They perceived the FCA as ‘reluctant to act and this reluctance was preventing [the regulator] from thoroughly investigating reports’
Advisers who whistleblow are the finest of their profession. Not only are they showing courage but their knowledge and insights can shine a powerful light on the misdeeds of others in the industry.
For the FCA to fail them is more than a wasted opportunity. It means consumers are left short and their confidence that there are genuinely ethical advisers prepared to stand up for their interests is damaged. This in turn damages market confidence, whose enhancement is a key function of the FCA.
Advisers and consumers deserve better from their regulator — and quickly.
Nic Cicutti can be contacted at nic@inspiredmoney.co.uk
This article featured in the September 2023 edition of MM.
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I’m surprised to see here no references to the BBC’s Panorama programme on this from as long ago as summer 2022 or to the latest train wreck resulting FCA’s failure-to-act on numerous whistle blows, namely WealthTek.
Yet again, questions arise as to why the Treasury continues to take no action against the FCA, why Bailey has been allowed off the hook, why MP’s aren’t making more noise about both issues and why the FCA fails to act on whistle blows despite claiming to be keen to encourage them.
Nic everyone keeps going on about the British Steel pensions scandel,,, but!!! no one keeps going on about the LLoyds Bank Auto enrollment scandal!!..SEDol No 3337608, makes the above seem small, if your using the amount lost. O yes! and these people can get no compensation. Sent a copy to two Ex Pension Ministers andgot no reply!! I wonder why… Stay safe
Talking of LC&F, https://www.professionaladviser.com/news/4124629/london-capital-finance-creditors is worth reading. Monies lost by investors inxs of £85k will be beyond the scope of the FSCS, so they’ll be gone for good.
As always Nic, all you have to ask is, cui bono?
Saw your reminiscence about Scot Am. That’s rich! I well remember going to a seminar where the Scot AM bod was telling the audience to transfer, transfer, transfer. And then the first pensions transfer scandal broke.
THe air seems full of numerators… but… as I keep saying – The FCA, amongst other similar bodies in different sectors,
(E.g. Health, OfWat), is there to protect Govt. NOT anyone else = the denominator.
Bad apples may be found out, then censured, fined, or kicked out, but how do they become available in the first place, or able to continue oonce their practices are uncovered? At last reference is made to the CoC of the forces of darkness – A. Bailey… Mr Teflon… surely able to equal the Teflon Twins themselves… Tony & Gordon!
Even when found out, action takes years under the guise of inquiry.. why more situations fail to make courts is a mystery to me – pysycho analysis offers welcome over luncheon LV.. 🙂 – though, to say A. BAiley is no more than a nuisance (under a Tort) is surely worth a Whistleblown investigation in its own right!
Those are big amounts but can involve the little accounts of the too quiet ‘little people’, by the thousands.
In place of doing nothing,a current fashionable excuse seems to be that “It’s not in our remit”.
One of my gravest concerns regarding the FCA and its predecessors has been its contempt for whistle-blowers. Those speaking to them seemed trained to end the calls soonest – with meaningless platitudes – whilst being utterly incapable of appreciating the gravity of the matters reported. The FCA has seemed complicit in disregarding market intelligence as nothing more than petty squabbles between competing firms of equally grubby advisers. Its contempt has cost consumers dear for decades now. I sincerely hope matters are now improving as the FCA promised they would.
Dream on. FCA promises mean nothing. How many times has the FCA claimed to have learned lessons from its latest failure but, in practice, done nothing whatsoever to prevent the next train wreck, the one after that, the one after that and so on ad infinitum? Anyone who believes that WealthTek will be the last is living in cloud cuckoo land.