In his speech at the UK Professionals Conference, Adamson highlighted ‘culture’ as underpinning the problem faced by firms and as the key attribute the FCA will look to assess going forward. The FCA is looking for ways to promote an ethically responsible culture. The FCA plans to assess culture through many different methods, including looking at how a firm responds to regulatory issues, what customers are actually experiencing, how a firm runs its product approval process, the manner in which decisions are made and even remuneration structures. Adamson said that by looking at all these various factors the FCA will be able to draw conclusions about the firm.
Adamson identified three principal factors which make up the ‘culture’ of a firm:
- Setting the tone from the top
This was the idea that everyone has ownership for doing the right thing and this is established by the CEO and senior management and personally demonstrated through their actions.
- Translating this into easily understood business practices
Adamson gave examples where companies had done the right thing for its customers even if this came at a cost. This consumer focused behaviour should filter down through the company so that the senior management can be sure that sound advice is being given on the ground.
- Supporting the right behaviours through performance management, employee development and reinforcing culture through reward programmes
Incentivise and reward employees to encourage the right outcomes and have effective recruitment policies in place. Adamson stressed the importance in advancing the right people as by advancing someone you are telling them their behaviour in the workplace is appropriate.
These three factors reflect the overall consumer protection and market integrity focus of the FCA. This focus on culture has come off the back of the erosion of trust in financial services in recent years, namely, the miss-selling of pensions, PPI and the LIBOR scandal.
Adamson stated that in the past there had been a culture of seeing consumers as somebody to maximise profit from and therefore products were not always sold with consumer interest in mind. Adamson accepted that the FSA had not been an effective conduct regulator. In the past, the FSA had tried to tackle problems by forcing disclosures and this was often seen as enough to absolve a firm from any real responsibility and, consequently, the cultural approach of going the right thing has been lost.
In his speech, Adamson also highlighted that the FCA intends to put a greater emphasis on the scrutiny of boards and individual accountability. The FCA hope to ascertain whether the individuals understand the firms strategies for cross-selling products, how fast growth is obtained and whether the products being sold match the markets they are designed for. By focusing on boards and individuals, the FCA will be more prepared to hold these individuals to account when things go wrong.