Financial Conduct Authority wakes up and and backs our mantra on wealth, but JEFF PRESTRIDGE asks, can the regulator walk the walk?
It appears the City regulator – the Financial Conduct Authority – has finally woken up from its lockdown slumber and decided to go all bold on us. Miracles never cease – I thought it had gone into permanent hibernation (if only the pesky squirrels in my garden would do so).
Last week, the FCA revealed ambitious plans to turn a nation of savers into investors. It also promised to protect investors from scams and warn them away from higher-risk investments (usually involving cryptocurrencies).
All rather messianic and all rather unusual for an organisation that has a bit of a reputation – fuelled by scandals such as Woodford and London Capital & Finance – for preferring to do nothing until it is too late. Fiddling while Rome burns.
Finger on the pulse: We must give the FCA the benefit of the doubt and pat it on its bureaucratic back
Indeed, you could argue that these ambitious plans are also far too late. After all, we’ve already had some 12 years of rock bottom interest (savings) rates and along the way far too many investors have been scammed or duped into buying near toxic investments. As well as Rome and fiddling, stable doors and horses bolting spring to mind.
But, for the moment, let’s give the FCA the benefit of the doubt and pat it on its bureaucratic back. Under its proposals for an investment revolution, savers with big slugs of their money in cash (bank and building society savings accounts) will be encouraged to diversify into stock market investments. By 2025, the aim is to make investors of 1.7million adults who currently have more than £10,000 of investible assets sitting in cash – and who the regulator believes would be better off spreading their wings.
As a result of paltry savings rates and persistent inflation (3.2 per cent at the last count), the FCA says these savers are at ‘risk’ of having the purchasing power of their war chest seriously eroded unless they take corrective action.
They would be better off, it says, building long-term wealth by investing in the stock market.
It’s an argument that cannot be argued against. In fact, it’s why this newspaper for nearly three years (third anniversary coming up on September 30) has had a section dedicated to wealth creation. Readers love it and can’t get enough of it.
Our longstanding message, which the FCA has now latched on to, is: ‘Yes, cash is great for financial emergencies, but it won’t build you a financial fortress. For that, you need to be bold and invest for the long term – using tax-friendly vehicles such as Isas and pensions.’
By 2025, the FCA also wants to have reduced the number of investors exposed to ‘higher-risk’ investments: everything from cryptocurrencies through to unregulated investment products and mini-bonds (peddled in the past by the likes of LC&F).
It says it will do this through a mix of measures, including making it more difficult for companies to market such investments and spending £11million on a campaign aimed to improve consumer awareness about the toxicity of some of these products.
The final piece of the regulator’s jigsaw will be a more ‘assertive’ stance taken against investment scammers – music to our ears, given our current ‘Nail the scammers’ campaign.
In summary, the FCA is talking a good story about how it intends giving consumers the confidence to invest without fear they are being ripped off.
But it’s the next three years that matter. It’s then that we will find out whether as well as talking the talk, the regulator can walk the walk. I’m not confident, but hope that I’m wrong.
…and it must work to protect cash
This Thursday marks the deadline for the Government receiving feedback on its proposals for keeping access to cash on this country’s high streets. The legislation that follows will determine whether cash is available nationwide in the years to come, or whether it will be left to wither on the vine. Given our longstanding Keep Our Cash Campaign, we hope cash is very much kept alive.
It’s vital that the Government’s legislation is robust and puts a statutory duty on the banks to maintain access to cash on the high street – through a network of free-to-use ATMs and branches, as well as newstyle community banks. With legislation unlikely to get on the statute book until 2023, it is imperative that in the meantime the banks aren’t allowed to demolish their ATM and branch networks in the pursuit of profit and a cashless society.
The regulator – yes, the FCA – should be bold (again) and insist on an ATM and bank branch closure moratorium until any legislation is in place.
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