FCA and Woodford - the truth

This week we have seen a lot of brown stuff being thrown at The FCA over the Woodford fund. The truth is that some blame does lie with them but not all.

Quick Background

For those of you who don't know, Neil Woodford is a well-known investor who invests money on behalf clients. Recently his investments have gone south, and investors have asked for their money back. Neil's fund doesn't have the money in the bank to pay them back until he sells the stocks and shares that he invested in. Until he sells them, they can not have their money back.

Now the media are trying to blame the Financial Conduct Authority for allowing this to happen. That would be the same media that have over the last ten years told their readers that the fund run by Woodford was amazing. Sites like the Daily Mail are trying desperately to shift the blame.

Is It The FCAs Fault Directly?

No, it is not. Investors should have read the agreements that they signed with the Woodford funds. If they didn't like the terms and conditions regarding the suspension of withdrawing funds, then they shouldn't have invested. That is how capitalism works, the conditions were clear, and as adults, they signed up to them. Investors had access to their own legal counsel and should have taken advice.

It is not the FCA's job to micromanage their investments for them. The FCA can't be responsible for everyone.

Indirectly is it the FCA's fault?

Yes, yes it is. The problem with the FCA is that with all their slick presentations and all these Gucci promotional videos that they offer. They are selling a false sense of security. We see it all the time in the loans business. Individuals think they can be as crazy as they want, make stupid decisions, send money upfront for loans to India thinking that the FCA will recover it for them if it goes wrong.

The truth is that the FCA is almost toothless. It's not their fault; no regulator can be on top of everything 100%. What the FCA is responsible for is the image that they are capable of doing so. People in this country would be much safer is the FCA came out and said they were on their own and responsible for their private investments. Those involved in buying financial products would then start to take their purchasing decisions much more seriously.

Scrapping the FCA would be safer for everyone.