Surface Ripples

SETTING UP A FINANCIAL SERVICES REGULATOR

Regulation is the "hot topic" now thanks to the global financial crisis which broke in 2007.

Most countries have always had a regulator in some form or another. Often, this role has been performed by the Central Bank. However, as the global financial system develops and expands, many countries have started to examine whether they need to strengthen their regulatory capacity and what the most effective way of doing this is. For those setting up a regulator, the following need to be considered:

Objectives:
What will be the overall objectives of the regulator? Each country will have its own needs, which may or may not be common to those of its neighbours. The UK Financial Services Authority, which regulates the UK financial, markets has five:

• market confidence
• financial stability
• public awareness
• consumer protection
• reduction of financial crime

These cover a wide range of activities and thus the regulator will need to have diverse experts, skill sets and systems. What is essential is to work out what the country itself needs rather than trying to fit on someone else’s model. Since thew crisis, the UK FSA is being re-structured, so the conclusion is that this area will continue to be a "moveable feast" as time marches on.


Formation of the Regulator:
The regulator needs to be authorised and set up by law. Depending on the country, this will be by ministerial decree, parliamentary legislation, or other methods. The point is it has to exist in law and be a legally recognised institution to carry out its work. The law has to be drafted to allow it to do the job set out above.


Scope:
By this, we mean what sort of organisations the regulator will be expected to regulate and the powers it will have. Whilst this is easy to answer at one point in time, there’s no telling what the future might bring, as I hinted above. New financial products, services or technology will bring about the creation of new types of provider which may not exist now. Will the law allow them to fall under the scope of the regulator? If not, will they be exempt from its control? Hedge Funds are a prime example. Despite the fact that they’ve existed for some time nobody really thought to regulate them, resulting in perceived excesses and overstated contributions to the financial crisis.


Powers:
When promulgating the law setting up the regulator, its powers must be made clear (and these need to be enshrined in the law that sets up the regulator in the first place). Is it expected to set policy? Is it expected to supervise, inspect and report? Is it expected to approve appointments and if so at what level? Is it expected to take legal action in cases of fraud and/or criminal activity and impose penalties(and if so, under what legislation)? Existing laws may need to be reviewed for relevance and amended if required. What enforcement powers will it have? These need to be clearly stated. In the UK, various laws (e.g. the Financial Services and Markets Act 2000 and the Proceeds of Crime Act 2002) set out the law by which providers of financial services are expected to abide and under which they may be prosecuted for various offences.


Cooperation:
One of the lessons learnt in the UK as the crisis unfolded was that the UK regulator (the FSA), the Treasury and the Bank of England were not really coordinated and as a result no one took the lead in resolving the crisis for some time. It needs to absolutely clear who should do what and in what circumstances. These parties all need to work together and avoid overlap (which will make drafting the law even more critical as you can’t have two departments doing the same thing).

The regulator will also need to work with other world regulators and agencies, professional bodies and governments in order to maintain full awareness of worldwide developments in the financial services markets and their impact on the local scene.


Structure:
Will the regulator be independent of the Central Bank? Who will it report to? Who appoints its officers? How will it be structured? This will depend partly on the powers given at law (it will need departments to carry out those functions, e.g. audit, investigations). Are the staff available, and if not, how can they be found?


Systems and Processes:
Having a regulator is well and good, but assuming that monitoring is one of its functions, it needs systems and processes not only to gather information, but to analyse it and report problems quickly.


Budget:
The regulator has to be paid for to do its job. Most regulators levy fees on those whom they regulate and can also impose fines for breaches of regulations and code of conduct. The budget will largely depend on what the regulator is expected to do and the sophistication of the market which it oversees. This is why I’ve left this item til last!

In all, a number of issues to consider and manage on a continuing basis. This will be an industry that will always be playing "catch-up".

Labels: Regulation

posted by William Martin @ 01:22 0 Comments

We're now back from summer holidays, the children should have gone back to school (or be getting ready to start back at university), so where does that leave you?

September is a critical month for businesses. We're all gearing up for the pre-christmas push after a long summer of school holidays and absent colleagues. "Budget period" will soon be upon us (if it isn't already), so this is when you need to knuckle down to set things up for the next year.

So what do you need to do?

First: go over the current year's plan. What did you (and/or your team) want to achieve by the end of this year and how far along are you? What still needs to be done (as you've only got three months left to do it)?

Second: get back in touch with your internal and external network and/or customers. What have they seen/done/experienced over the summer? How can you support them? What might you need to put in place? Have events over the summer affected other people's ability to deliver to you?

Third: make your plan - week by week and month by month. Remember that, from mid-December, people will be off on Christmas holidays until mid-January, so time is short. By putting together a plan, you give yourself focus and direction for the rest of the year and the start of the next. So often, next year's sales are set up in these final few months of the year!

Labels: Customer Care, Selling, Strategy

posted by William Martin @ 16:34 0 Comments

Seek And Ye Shall Find..

I've received a number of calls over the last week from various organisations trying to sell me products or services. One thing they all had in common was that they were too focussed on telling and not enough on selling.

Too many sales people are so full of information on how brilliant their product/service is, that they forget to ask what their customer needs. Instead of a productive two-way conversation, you get a monologue which has resulted in me simply hanging up on several occasions. Not only has the salesman lost a sale, he or she has also lost my goodwill towards their company. What will it take to get that back?

So what do you need to do? The answer is simple - ask questions. Draw information out of the customer about what it is they need and then describe your product in those terms.

Two interesting cases:

My mother wanted to get a mobile phone, so I took her to the outlet of one of the UK's largest mobile operators. The young assistant greeted us and then immediately moved over to the latest gadgeted wonder that they had. He didn't take the time to ask what my mother needed (basically a mobile with large keys and screen so she could see what she was doing). What she didn't need was a mobile which could browse the internet, tell her where she was through GPS or allow her to watch video clips. When the assistant finally finished some minutes later, I had to bring him back to earth and take him through the process of finding out what she actually needed (and was prepared to pay for). We got the phone, but that assistant had wasted his time (and ours) and could have lost a sale or ended up with an unhappy customer who had been sold a mobile that wasn't suitable.

The second story happened a few days ago. A van turned up at our house at 6.15pm and the owner wanted to introduce his quality frozen food business. Before he could launch into his pitch, I said we were due to go out at 6.30pm, so could he hurry? He obligingly did, but started by showing frozen fish. After several minutes, my wife informed him that I wasn't a fish eater. He had just wasted his limited time trying to sell something that we wouldn't buy. He'd have done better to ask first what we ate and then moved to the product that would interest us most.

This all seems so simple to avoid, but how often do we fall into the trap of telling and not selling? What counts isn't the product, but the customer and what they want.

Labels: Selling

posted by William Martin @ 18:42 0 Comments