Too great a burden
Recently, I met an old solicitor friend and he told me that he was retiring from the law, and that his decision was, at least in part, down to the fact that the degree of regulation that now surrounds us has drained his enthusiasm to continue. I sympathised.
Two days ago, a trust company director whom I have known for a long time and whose opinion and judgment I have always respected was complaining about the extent of the due diligence he had to undertake before accepting a new client. One case involved part of a complicated structure of companies and was driven by a perfectly proper set of considerations involving different trades and participants, with (no surprise) a trust at the top. The level of diligence required was going to cost him a lot of time and money to investigate, and cost the new client a lot of time and effort to answer.
All this breast-baring was going to take place at a time when the prospective client had not yet built a deep personal level of trust in the new advisor, and that meant he was not comfortable being asked to give a complete picture of the entire structure. It should be no surprise, therefore, that the potential client is no longer a potential client: the process was just too distracting and intrusive. The frustration for the director was that, from what he had seen and been told, he knew that the incumbent trust company was not providing value or a good service.
Regulation has become an industry of its own, and governments around the world have taken it up with alacrity, partly because it moves responsibility off their shoulders and gives them someone to blame. But for those who are regulated, it also creates such an atmosphere of defensive self-protection that it can attack the very heart of the business, not to mention its profitability. What regulator, either industry-wide or within a business, is going to do anything other than over-egg the pudding? Who is going to say ‘We don’t need that level of enquiry’? The regulators remain in place exactly because they are employed to cover their own backs.
The trouble is that excessive regulation is impeding the ability of all of us to get things done. Our ability to administer an estate, to take a simple example, is being frustrated by heavy-handed negativity, especially from banks and financial institutions, on the basis of data protection. Recent comments about the need for those taking instruction for wills to ask for a list of user names and passwords elicited a letter from a friend of mine who had faced just that problem and had had to overcome intransigence from the banks and financial institutions involved.
It is not realistic to turn back the clock, but we will lose respect and business if we don’t strike a balance with the commercial imperatives. We don’t need to know the shoe size of every client we are taking on!
Stay up to date with the latest industry developments and standards via the STEP Journal, Trust Quarterly Review and STEP News Digests. For an exclusive insight from the Financial Action Task Force on the latest AML standards, see John Carlson’s article, ‘The battle continues’, STEP Journal November 2013, vol 21, issue 9, page 63.
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