It’s a bold move to mention the recent extended period of blue skies and lack of rain on lang cat world as it will almost certainly be pouring down by the time you read this, but it makes for a handy metaphor for the current landscape of government and regulatory interventions.

As things stand, the industry has had some sunshine this year in the form of a few good news stories from the regulator.

The FCA’s review of ongoing advice found that advisers were, indeed, delivering suitability reviews to their clients. The length of the review and rumours circulating in the market suggested the FCA had found evidence of real problems in the ongoing advice world, but in the end the findings suggested otherwise.

The regulator announced the contentious proposals to publish the names of firms under enforcement investigation (subject to a public interest test) would not, after all, be taken forward. This wasn’t received as good news by consumer representatives, who were keen on the transparency aspect, but the industry was more or less united in believing it was unworkable.

And the outcome of the review of the FCA Handbook promised the removal of outdated guidance and some overly prescriptive disclosure rules which weren’t appropriate for online and digital transactions.

The new and improved Mansion House deal

As far as the government is concerned the sunlit uplands will be reached if only the economy can be persuaded to grow.

As part of the financial services industry’s contribution to the growth agenda we’ve had the Mansion House Accord, agreed with 17 of the largest providers committing to invest at least 10% of their DC default funds in private markets by 2030, with at least 5% of this being invested in the UK.

The government is at pains to point out this is much better than the Mansion House Compact of 2023, launched by the last administration, signed by only nine providers (two more joined later) promising only 5% investment.

It’s not been without criticism though from those wary of the cost and liquidity implications of such a target for investing in private markets.

The regulators have also been charged with supporting the growth agenda, with a sharp prod being delivered to the FCA and other regulators just before Christmas to come up with some initiatives to kick start that growth.

The FCA has made a variety of pledges, including reducing ‘the regulatory burden’ and regulatory reporting requirements. The first practical evidence of this was the launch in March of the new MyFCA portal to streamline access to various online services by using a single sign on for Connect, RegData and the online invoicing system.

The growth objective, as well as commitments to doing the day job more efficiently and effectively, helping consumers navigate their financial lives and reducing financial crime were highlights of the FCA’s new five-year strategy.

Reviews, reviews, reviews

On the policy front, there have been signs of simplification in the mortgage market. We’ve had a consultation on rule changes designed to make it easier and cheaper to get a mortgage or remortgage, as well as retiring some obsolete non-Handbook guidance.

This is a sign of the shift in the regulator’s tolerance for risk, as it’s been quite open that the plans will result in some people defaulting and losing their houses. It does, however, believe the plans will improve the market overall.

It’s not all about simplification and removing rules though.

In a Dear CEO letter to the asset management and alternatives sector, the regulator has woken up to the growth of the MPS sector and stated its intention to start a multi-firm review of MPS, specifically looking at how firms are applying the Consumer Duty. The intention is to share good practice (and presumably chastise any firms where they find bad practice).

The concept of the Dear CEO letter itself is under review – with 46 ‘portfolios’ of businesses to regulate, it’s acknowledged this is a pretty cumbersome way to regulate, and we can look forward to more targeted communications in future.

Dragging us back to the weather metaphor, there are some ominous clouds on the horizon.

The biggest is likely to be the chancellor’s Mansion House statement on 15 July, which will include the launch of the Financial Services Growth and Competitiveness Strategy. The strategy was consulted on last year, and we were due to see it in the ‘Spring’, but events such as a global trade war and associated market turbulence may have required something of a rethink, so let’s be generous and stretch ‘Spring’ to mid-July.

On the advice front, so far we have had the first proposals from the advice guidance boundary review looking at how targeted support might be applied to the world of pensions. We now wait for the next stage which will consult on how the concept might be applied to other investment products.

Although due by the end of June, we can’t rule out an announcement around the time of the Mansion House speech, if it’s brought within a wider package of reforms.

Possibly the most broadly-trailed is the government’s promised review of the ISA landscape, tackling the proliferation of products since the concept was launched.

There are a few competing demands at play here. The government is keen to see more retail investors diving into the stock market, the regulator is worried that people are missing out on investment growth by keeping money in cash and the investment industry is more than happy to help this change.

Meanwhile the building societies are arguing that cash savings are fundamental to their lending strategies. All this adds up to a likely battleground over the future of the cash ISA.

Alison Gay is senior regulatory consultant at the lang cat

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