The regulator’s move to principles based regulation is generally welcomed by most in the industry. Indeed, it could be seen as the regulator treating the advisers as ‘adults’ and trusting them to ‘get it right’! However, there are those in the industry who would prefer to hang on to the more prescriptive guidance as they fear that they may fall foul on the interpretation of how they achieve the outcome that the ‘Principles’ seek to achieve.
A major problem with regulation in the past has been that regulation has been structured to control the standards of the lowest. Many would argue the regulator ‘assumes guilt’, so requiring individuals and companies alike having to prove their systems and practice are ‘innocent’.
So, will the ‘guidance manuals’ disappear? Not a chance! The regulator’s mindset is unlikely to change when looking at the activities of the industry and so the ‘assumption of guilt’ will most likely persist. Consequently, the best means of showing that you have a robust means of achieving the desired outcome sought by the ‘Principles’, inevitably will be detailed guidance backed by records and monitoring. However, with what could be a wider variety of guidance and practice being created to achieve the same outcome, it is still likely that their suitability will be subject to individual interpretation – especially at the time of audit inspection or complaints handling – often with the benefit of hindsight being applied.
In a nutshell; ‘all change no change’!
