This week, we speculate as to what the FCA is really after in their Practitioner Survey.  How closely do their actions follow their words, with the new Consumer Duty laws? And we also look at Hunt’s budget and the likely forthcoming non-impact on stock markets.

FED UP FEEDBACK

Periodically member firms get quizzed on how we see the FCA; this time they promised a shorter form. Well, if that’s shorter, I’d hate to see the long one. Take a look here. Thirty-nine questions, but so many cover multiple topics, it feels more like a hundred.

It is typical of such surveys designed by marketing advisors: a few soft questions, how are you today type guff, a few “have you stopped beating your wife” ones, just to check you are actually awake, then a lot of navel gazing on SICGO. They really despise it.

This is purportedly about promoting competition. Which actually makes the regulator’s job harder – encouraging more firms and lowering the barriers to entry for new firms.  The FCA does not like that idea much; so, note, it is a SECONDARY International Competitiveness and Growth OBJECTIVE, get the Secondary stress, minor, icing on the cake stuff. Objective, so just an aspiration, not real. Their minutes (above) even admit that.

Then we have more ‘are you happy questions’, then some tiresome back scratching ones, just how great are we at seminars? answering the phone? sending you flowers? You get the picture.

Then a few global ones, how good are we at promoting world peace and intergalactic harmony? By this stage you are probably wondering what this is, I am. And the idea creeps in that it is nothing to do with the poor regulated mugs, anyhow. So probably not much to do with the consumer either.

Meanwhile I see a landscape of poor consumer outcomes, vast sales driven peddlers of half-truths, a fair bit of market abuse, absurd barriers to entry, the insiders and regulators getting fat, the savers, investors and users of capital paying for it all.

NEW LAW OLD RULES

They also published “A new Consumer Duty Feedback to CP21/36 and final rules” more terribly exciting stuff, a mere 70 pages of it. They make much of the “Risk of Retrospection”, saying “we were clear that the Duty would not have retrospective effect and would not apply to past actions by firms”.

OK, this is a key political input; the industry has had enough of new rules, looking back. So, I take it that we won’t see big attacks on UK listed finance firms this time?

Not so, you guessed it, the entire financial sector is suddenly seeing bigger provisions, because, it seems, of the new rules. It looks very much like the damaging hits on SJP Close, Lloyds, are exactly this, retrospective application of laws, an action so vociferously foresworn by the regulator.

And this helps competition how? Well not at all. But do remember it is a secondary aim and applies only to “competition in the interests of consumers” so not real competition, but one where the mechanism (competition) and the outcome (interests of consumers) get muddled up.

So, for instance destroying UK financial services firms is fine if done “in the interests of consumer” and what could be more in their ‘interests’ than getting money back on a contract they willingly (and legally) signed ten years ago?

And that’s why choice and consumer outcomes are being lost in box ticking and adverts of fluffy kittens, sunsets on beaches and the like. Just look at the UK ISA advertisements, do they tell you anything? Beyond heavy hints at nirvana with no work.

HUNT’S LAST HURRAH

The budget? Well, it is so dull, you feel it is simply what the HMRC nerds wanted. More complexity, a few free hits (non doms), more CGT breaks for landlords, for the rentiers not the creators, less employee NI, but no change to employer NI, that actual tax on jobs remains as harsh as ever.

We are well into Q1 now, so I guess the intriguing thing is more this firm Treasury conviction, adopted by the OBR, that inflation will fall towards 2% in Q2. Given their prior errors, that is very bullish, and does not support base rates at 5.25%, frankly not even at 3.25%.

It is all circular, despite commentators’ child-like obsession with margins for error. If inflation stays high, tax raised stays higher, covering higher public sector spend. So low inflation is (oddly) a cautious model prediction.

The market does not believe it. Nor do we. Not quite chapeau consumption time, but I don’t see 2% this year. I am not sure where this recession is, but not in any of the streets I walk down.

If interest rates are really about to fall off a cliff, the FTSE looks oddly stuck, miles behind the US indices, and sterling also looks curiously strong. If saving rates are about to be pummelled, the yield stocks that fill the FTSE will suddenly look very cheap. Which suggests the markets are not buying it, not yet.

A 500-point rally might even be plausible, if the OBR is right, but it is not, and talk of headroom is nonsense. This remains an expansionist fiscal mind set, but of quite limited duration, hence the market caution.

Elsewhere we are in ‘riding-the-tiger’ time: if you are onboard, how and when do you get off it?