Regulation Overload

Let me apologise now. This is probably the least interesting blog I have ever written for clients. Don’t be fooled by the picture of pretty cygnets.

Frustrating Month

Hopefully from the outside, our business just looks like its nice and relaxed. But like a swan, above the water all looks serene but below the surface every moving part is going like the clappers to keep it there. Such has been the last month or two with for us more to come over the coming months.

Authorised & Regulated by The Financial Conduct Authority

This one line says it all, but let’s dig a bit deeper to see what it means. Authorised is easy to explain. It’s just the first hurdle to jump. Show the FCA you have sufficient capital to wind down a business if it all goes wrong and they will consider your application. Minimum capital is currently €50,000. Then submit a business plan, demonstrate experience, complete a huge amount of application paperwork, obtain Indemnity Insurance, send the fee of £2,500 and wait six months. It’s arduous, but the job is only done once. We became directly authorised in 2005 and then obtained our Investment Management permissions in 2012. So we have done it twice. That’s authorised.

Regulated is ongoing surveillance. Regulated is business as usual. It’s a series of hoops to jump through under the beady eye of the FCA. There is an ongoing annual cost for being regulated. About £4,000 for the FCA & £15,000 for indemnity insurance. On top of that we have “ad-hoc” compensation levies to find to re-imburse those unfortunate enough to have been genuinely ripped off. (And those who have been ambulance chased or have selective memory). These levies run to £100’s of millions across the industry each year. These amounts are on top of what clients have claimed from businesses still trading, like all the banks.

Being regulated means we are part of the Financial Services Compensation Scheme. Thought it was the Government who dips it’s hand in it’s pocket when someone is ripped off? Think again, it’s those honest advisers who are still trading who pay up to cover the rogues who have scarpered. There is not a single other business I can think off that recompenses it’s competitors customers.

Imagine British Airways being forced to pick up the compensation that Ryanair won’t pay!

Anyway this isn’t a rant, I’ve lived with this inequitable situation for 20 years now and it isn’t going to change anytime soon.


Regulation is delivered by on-line reporting. Twice a year I submit the data. As my business year end is July, I have just completed a full report which takes a couple of days. As it was my end of the year I also have to submit my accounts. We are given 30 days to comply, generally the HMRC allows 9 months for other businesses.

I also need a “Statement of Professional Standing” (SPS Certificate). This is required by all client facing advisers in the UK and is delivered and monitored by an Professional Body. They are issued once the industry body, mine is the Chartered Insurance Institute, is happy that I have completed 36 hours of Continuing Professional Development (CPD). As I’m Chartered I have to submit 50 hours. Again it’s an on-line form that takes at least a day or two to put together and submit. A complication of also being a Certified Financial Planner plus a Chartered Wealth Manager means I have two Professional Bodies to answer to. These two on-line forms also need completing by the end of September.

Again this is just business as usual.

So what’s changed?

The eagle-eyed amongst you would have noticed earlier that I said we need to hold the equivalent of €50,000 at all times. So yes we are subject to European financial regulation too. Since 2010 when we obtained our Investment Management permissions we have been subject to a thing called MiFID. I won’t bore you with this as you can Google it if you are interested, suffice to say it’s our passport to sell our services to our fellow Europeans. I’m required to comply with MiFID, although it has been of absolutely no use to me for 5 years.

Let’s be honest, the French and the Germans won’t buy Lancashire cheese, so they are not interested in Lancashire Financial Planning and Investment Management.

This MiFID passport to Europe is the thing I will lose on Brexit unless some sort of compromise is struck. It’s a big deal for the Banks and the big Investment Companies who are rather more successful at selling to Johnnie Foreigner than I am. But the European Banks and Investment Companies in the UK also need this compromise just as badly. London is after all, France’s sixth largest city by population!

Anyway what’s changed is MiFID. From 3rd January it becomes MiFID II. Wow I hear you all exclaim. So far just to understand this largely superfluous legislation has taken me days and days and days and days. So many days. Thanks Jean Claude.

The part of MiFID that many need to comply with is the requirement of Legal Entity Identifiers (LEIs). My business has obtained one now, every limited company I invest for will need one by January 3rd, as will almost every trust I invest for.

Expect a personal call from me if you are required to comply and expect an initial cost of a couple of hundred at least, followed by annual costs of around one hundred.

Anything else changed?

Yes there is more. There always will be. From next year the Data Protection Rules all change. Out goes DPR, in comes GDPR the Global Data Protection Register. It affects many businesses, not just Financial ones. If you or your business holds personal data start working now. Much has to change to ensure compliance.

And now to something interesting

The markets. My next blog is our quarterly investment update. I can confirm now that not much has happened over the quarter. It’s not surprising, the whole investment industry and advice profession has been too busy keeping Regulators happy. Maybe that’s why markets have been so flat over summer.

5 Replies to “Regulation Overload”

  1. My head hurts after reading that. I will have to lie down in a darkened room for a while. Glad it’s you and not us retirees! Keep up the good work!!

  2. I’m glad you’ve got that off your chest. Rather you than us!

  3. All downloaded and I am much the wiser, thank goodness you are around!

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