DIY Investor Magazine
/
2015 Issue
54
FCA CEO MARTIN WHEATLEY’S
REMOVAL COULD SIGNAL A NEW ERA IN TERMS OF INVESTMENT
When we look back in five years’ time, the ejection
of the FCA’s CEO, Martin Wheatley, may have been
the catalyst for the capital advancement of British
companies.
Why? Because the political wind is beginning to blow
favourably toward those who realise our regulator
needs to move away from discouraging you and I to
invest as we please.
Chancellor George Osborne, who is clearly behind
Wheatley’s dismissal, said a ‘different leadership’ is
needed to take the FCA forward.
In other words the betting has to be Wheatley’s
successor won’t be as outdated and wrong headed as
he was.
Earlier this year I gave a speech, controversial at the
time, entitled ‘Our Regulator Doesn’t Understand
Investment’ I set out to identify the heart of the
problem. Little did I know then that my views seem to
be heading into the mainstream! Here is the keynote
from it:
‘Many of us realised a long time ago that financial
regulation has little to do with regulation and
everything to do with politics. The FCA is obsesses by
the thought that one day a little old lady may lose her
life savings of £5,000 in an investment, complain to
her MP who then stands up in parliament and wants to
know what the regulator is doing about it.
The whole culture is driven by this fear and that doesn’t
lead to a healthy understanding of what investment is’
Regulation has little to do with regulation
and everything to do with politics
An excellent book by the recent CEO of Berenberg
Bank, Andrew McNally called ‘Debtonator’ was
published the other day.
In it he draws attention to the inevitable consequences
of this overarching culture of fear and protection:
pensions need protecting, consumers need protecting,
consumers need protecting and savers need protecting.
On one level they are right – protection from poor
or fraudulent business practices is essential – but
protection has turned to denial of equity ownership not
just in the regulators’ approach to pension funds but in
the setting of society’s approach to risk.
We have to ask ourselves if we’ve sleepwalked into a
regulatory environment in which we discourage too
many not to claim a stake in the rewards of economic
progress itself. As what they call ‘risk assets’ a scary
was to describe equity are deemed unsuitable for
everyone apart from those that can tolerate ‘the risk’.
In other words that fear of the little old lady beating the
regulator about the head has blinded the FCA to what
investment is all about.
Hence our pension funds are ordered to fill their
portfolios with ‘safe’ government bonds as compared
to ‘risky’ equities (despite the fact that over any
long term period you care to measure in the last 100
years equities naturally outperform bonds), retail
investors are discouraged from investing other than
through fund managers who are forced to carry out
ludicrous ‘suitability’ tests, and something new like the
democratisation of investment through crowdfunding is
viewed with fear and loathing by our regulators, sitting
out there in Canary Wharf.
‘In summary I believe our regulator has essentially
become little more than an over-zealous traffic warden.
By City Grump
