New year, new regulatory resolutions?

The birth of a new year is a logical time for pledges of self-improvement. So, in a fit of blind optimism, here’s a list of resolutions we’d like to see from financial services sector players and policy-makers:

This year, the financial services sector should stop whining about the “regulatory burden” it faces. Regulators are a lazy, convenient scapegoat for a sector facing tough market conditions. The constant bleating about the cost of compliance reveals a short-term mindset – in a sector that preaches the value of focusing on the long run.

Rather than resisting any conscientious effort to enhance investor protection, firms should start to view such rules as an investment in investor confidence, and view the cost of compliance as the price for client trust.

Industry regulators should stop wasting everyone’s time with endless policy debates that they aren’t prepared to consummate. Over the years, regulators have developed the habit of embarking on extensive consultations that ultimately go nowhere and consume countless industry and regulatory resources but, ultimately, leave the original issues unresolved.

Unlike the cost of complying with the rules, this regulatory routine is exceedingly wasteful. There’s no evidence that this ceaseless debate results in better policy. If anything, it diminishes the regulators’ stature – feeding a reputation for impotence and inefficiency that carries over into regulators’ critical functions of ensuring investor protection and enforcing the rules. And this practice leaves market failures unaddressed. The regulators must resolve to fix the problems they find.

Finally, there are the elected officials and bureaucrats who have responsibility for both the financial industry regulatory structure and the retirement savings system. For them, we hope that they will finally resolve to put the interests of ordinary Canadian savers and investors first, and take action to meaningfully improve public retirement savings.

The failings of both the financial services sector and its regulators could be rendered so much less important if naive, unsophisticated investors weren’t compelled to try to navigate the markets by inadequate pension systems.