Last Tuesday, the Financial Conduct Authority (FCA) made one thing abundantly clear to the Treasury Committee: public announcements about internal decisions will now be subject to the criteria of its shiny new secondary growth objective. Translation? If airing their dirty laundry would harm the City’s international competitiveness or risk upsetting a market participant that’s just too big to fail, mum’s the word. Future consumers, they insist, will benefit. Current victims? Not so much.
Take, for example, the scandal surrounding interest rate swap products and small businesses. It’s a mess that’s still trudging through the courts. Would the FCA dare exclude a significant swath of victims from justice? Spoiler alert: allegedly, they already have.
So, the question arises: Is St. James’s Place (SJP) “too big to fail”? Judging by the numbers, one might think so. With 4,500 advisers managing £120+ billion in funds under management (FUM), SJP is a colossus. That’s £26.76 million in FUM per adviser, spread across 760,000 clients, each averaging £150,000 in assets. All this while boasting 175 clients per adviser. Impressive. Or is it?
Fees for No Service: A UK Replay of AMP?
Let’s talk fees—or more precisely, fees for no service. SJP is currently under the microscope for its “fee-for-service” practices, thanks to a Section 166 order.
In 2020, the Telegraph ran a story about an SJP customer who went 17 years without contact but still got fleeced for a “service” fee. And yet, SJP insists there’s nothing to see here.
The preliminary findings? Many clients either received no service at all, were given lip service, or endured fabricated “services” unworthy of the fees charged. The compensation bill? A paltry £460 million—but only if you ignore the fact that this practice spans two decades.
Do the maths, if only 100 of the 175 clients received satisfactory reviews and you’re staring down a figure closer to £5 billion. Sound familiar? It’s the $5.8 billion AMP debacle from Australia all over again. The only thing missing is the FCA’s mea culpa—don’t hold your breath.
Oh, and about those “discretionary” and “fixed fee agreement” disclosures in motor finance. If this little gem of a problem creeps into SJP’s pension and investment life bond products, are we likely to hear about it? Or will the victims, once again, be left dangling?
Speaking of institutional failures, let’s revisit the Judicial Review against the FCA over the IRHP (Interest Rate Hedging Products) mis-selling scandal. This week, the FCA’s counsel bent over backwards trying to justify the unjustifiable. Here are some highlights from the comedy of errors:
The Swift Report: The FCA’s lawyer argued that John Swift KC’s findings didn’t explicitly accuse the FCA of unlawful behaviour in 2012. The judge, in no mood for such nonsense, pointed out that Swift’s use of the term “arbitrary” was, in fact, legalese for “unlawful”.
Evidence? What Evidence? The FCA brazenly claimed it wasn’t obligated to provide a “clear, logical, and convincing” reason for dismissing Swift’s findings. Even more galling, key decision-makers hadn’t bothered to read the documents Swift referenced. You can’t make this up.
Sophistication Criteria Shenanigans: The FCA’s size-based test for deeming certain retail customers “sophisticated” was as arbitrary as it gets. Critics shredded this approach, pointing out that it flies in the face of regulatory norms.
The “Weak Hand” Defence: The FCA argued that its enforcement powers were limited in 2012. Why? Because it conveniently ignored damning evidence of bank misconduct, including hidden margin requirements and fraudulent credit lines.
The FCA’s defence was evasive, inconsistent, and riddled with credibility issues. Critics accused it of prioritising banks over consumers, constructing redress schemes designed to minimise liability rather than deliver justice.
The Financial Ombudsman Service (FOS), once a lifeline for wronged clients, has been all but neutered—thanks to fees imposed on professional assistance for claims. Victims, once again, are hung out to dry.
Growth at Any Cost?
The FCA’s post-growth objective era is shaping up to be one where regulatory transparency and consumer protection take a back seat to “competitiveness” and “stability”.
The parallels with Australia’s AMP collapse are striking—and frankly, a bit terrifying. If the FCA keeps playing by the rules of its secondary objective, one has to ask: are we witnessing a cover-up for a similar catastrophe brewing in the UK? Or will the truth, like so many victims, simply vanish into the ether?
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