Reflections as I enter my second (and final) term as Chair

As someone who comes from modest beginnings, I have a genuine passion for making people’s lives better. People create their own opportunities, and benefit from the help of others. This is the essence of what FSCS does too. Contributing to society in this way is why I joined the finance industry almost 30 years ago.

We have a big problem to tackle in the UK, and FSCS is a leading player in the reform agenda. Preventing consumer harm and in turn the burden of rising levies on the industry is crucial. Better standards, legislation and greater financial literacy are all part of the solution. I am proud of what we have achieved together over the past three years, and I am looking forward to continuing this journey, as there’s a lot left to do!

Recognising how far we have come

When I first set foot in FSCS's offices back in early 2018, I instantly recognised how dedicated and committed the whole team are, and how they are motivated by protecting people from financial harm. This unfaltering dedication to helping customers carries us forward and has particularly shone through during the pandemic period. It is clear that we have benefitted from some fundamental changes to our structure, an excellent leadership team, and a shared sense of purpose. We seem up for any challenge, and we have faced many together already.

The benefits of living and breathing inclusion and diversity

I believe there is a direct link between the strength of our performance and the diversity of our Board, Executive Team, and across FSCS as a whole. We are showing the way in building the leadership team of the future. Our Board is now 67% female and 57% of our senior managers are women, exceeding the 2022 target we set as part of the Women in Finance Charter. Beyond just gender, a truly diverse workforce in all aspects and at all levels is key to us being able to understand and serve our varied customer base. It provides a strategic advantage as we can identify a broader range of risks. We can be confident we are considering a wide range of perspectives when making decisions, thanks to the different life experiences our people bring to the table.

Diversity and inclusion for all is nothing new for FSCS. It is embedded into our DNA. In 2020, FSCS was listed in The Inclusive Top 50 UK Employers for the second year running. This is the definitive list of UK-based organisations that promote inclusion across all protected characteristics, throughout each level of employment within their organisation. FSCS climbed by 14 places from 2019 - a reflection of our ceaseless commitment to making an inclusive workplace a reality. I am immensely proud to work alongside such a talented group, and to be among such leaders. We have set the standard for boards in financial services!

A small but effective team

Our people have responded brilliantly to these testing times, not losing a day of service and reaching our highest recorded levels of customer satisfaction. Over the past five months, the average score from customers who've claimed with FSCS directly hasn't once dropped below 85 per cent. This is extremely impressive, especially for a service bound by lengthy technical rules. It's not always straightforward to guide a customer through such complexity, but our core service has evolved and strengthened markedly over time. It's now easier and quicker than ever before to make a claim with us, and in some circumstances, customers don't even need to make a claim at all - a convenience previously only possible in bank deposit failures. The benefits of this efficiency do not extend into the insurance world (yet), and we have work to do here.

The way we are stepping up for our customers during such a challenging time is no accident. FSCS treats its people well, and we have won many awards over the past three years for our innovative people policies and our approach to inclusivity. We recently achieved Investors in People Gold and engagement amongst our people is the best it's ever been. It hasn't at all been dented during the pandemic - in fact, it's only increased.

Our response to the rise of complex claims

The strategy we set out at the start of my first term as Chair was ambitious, and rightly so – we should set ourselves high standards and hold ourselves accountable to meet them; our remit is too important not to. The Prevent pillar of our '4 Ps' strategy was unchartered territory but FSCS's progress here has been impressive. When we first included Prevent on the agenda, we were alone, but now we find so many others expressing the same ambition. This is great! We need everyone to help with this.

Whilst we continue to provide the trusted compensation service that helps to increase consumer confidence in the financial services industry, we are also becoming a proactive force for positive change. We are working with our regulatory partners more closely than ever before, and we've shared unique data and insights to identify cases of phoenixing, highlight scams, help to prevent firm failures, and proactively contribute to the debate and consultation on matters of utmost importance. These include the future of the consumer investments market, the perimeter and boundaries of our protection and the importance of tackling online financial harm.

The role played by our regulators in this country is not an easy one. They are tasked with defending an enormous perimeter, and are constantly being tested by new technologies, and sophisticated bad actors. Their challenges have been laid bare in recent times, yet they have responded admirably, with fresh energy. Our work on preventing bad actors from re-emerging, sharing our data, and our submissions to their requests for support, have all had a constructive impact. We will continue to do all we can to support them.

We must not let the global pandemic distract us from the epidemic that was already well underway in the UK financial market before Covid-19 arrived - one of rising claims and compensation costs. Financial products and services have grown ever more complex, fueled by the opportunities brought through digitisation. As such, the claims we see have followed that same trend. Pensions and investments pose a particular challenge, and scams and fraud are rife too. Action Fraud reportedly received a massive 822,000 reports last year and UK Finance has said that the number of impersonation scams, where fraudsters contact potential victims pretending to be a trustworthy authority, doubled in 2020 to almost 40,000.  

What matters is that these financial products serve their intended purpose: to increase the wealth of their buyers. The investment advice provided to consumers must be helpful, and the variety of investment opportunities available must be welcome, as they help people to save and invest for their future. Finance and banking are valuable assets for our country. With that, we must help those who genuinely are baffled by it all to get onto a sound footing. We must also prevent those intent on abusing these vulnerable people from being able to do so. We must eliminate the advantage being taken by others.

As well as benefitting consumers, this work of course goes to demonstrate how FSCS is playing its part in tackling the burden of the rising levy on our industry. Shortly before I joined FSCS, the levy for 2018 was announced at £336m. For our financial year 2020/21 it's double that and forecasting suggests this increase will continue. Early in my first year with FSCS I shared my concerns about vulnerable people having their future snatched away due to poor advice from bad actors in the industry. Sadly, the continued rise in the levy demonstrates that the problem is far from over.

This rise does not mean progress hasn't been made, however, far from it. What we must appreciate is that there is a lag in the system. A significant proportion of the claims we see relate to advice given many years ago, so our hard work is not in vain, but there is more to do. It has been rewarding to see our strategy naturally evolve during its first two years, and we have very solid foundations to build on.

Looking to the future

We are facing incredibly difficult times. The progress we've made is undeniable, but that doesn't mean it’s plain sailing going forward - quite the opposite. Such a complex problem will never have a straight-forward, linear, solution. No silver bullet exists for consumer harm and the rising levy.

As it was back in March 2018, it continues to be vital that we're aligned as a team across the regulatory family and industry, if we're serious about delivering better outcomes for consumers. There are three areas in particular that I am keen to move forward on.

1. Better standards - We need higher standards set across all parts of the industry so that consumers are protected, along with the large proportion of levy payers who are doing good honest work. Our teams are mining our data to produce insights and highlight trends to people with the powers to make change happen.
2. Legislation - We need new laws to halt scammers and fraudsters in their tracks. I was shocked to read recently that new research shows that those with mental health problems are three times more likely to be victims of online scams and I support the inclusion of financial harm in the Online Safety Bill. Legislation plus collaborative effort between regulators, industry and bodies such as the Serious Fraud Office can stop these bad actors in their tracks.
3. Greater financial literacy - One way for us at FSCS to directly improve consumer outcomes is to educate people by raising awareness of our protection. Our research shows how vital this is: 81% of those aware of FSCS say they feel more confident in their financial decision-making in the knowledge that we exist.
   
   Our latest campaign, which launched at the end of March, focuses on two areas of complexity that consumers struggle to understand: pensions and investments. We are speaking to those aged between 55 and 75 who, despite owning more than a third of the UK’s wealth, lack confidence and knowledge about where to invest their money. They are at risk of making poor decisions and are prime targets for scammers. Our campaign encourages these people to check their pensions and investments are safe and FSCS protected. We are exploring what more we can do in this important area.

In isolation, we can only expect modest returns for each of these three areas - this is why joined-up, collective words and actions with industry, regulators, government and consumer bodies is so important. With better standards, choosing the right financial product should be simple. Underpin that decision with stronger legislation, and consumers are reassured that they'll be protected if something goes wrong. Simpler products, with clearer protection, means that education becomes easier. Complexity is the enemy here and if we dismantle it, piece by piece, I believe we will see more consumers making informed financial decisions that, crucially, are the right choices for them.

Everyone should be able to use their hard-earned money to improve their future, without having to worry about whether it is safe. While it will undoubtedly be a demanding time, I have no doubt that FSCS will rise to the challenge as it has done over the past three years and I am very excited about working with FSCS team members to play our part in this.