If you were a betting person, you would never have bet that a young Marshall Bailey was destined for a successful career in financial services. Born in the US to Canadian parents, both academics, he moved to France with his family when he was just six months old. Five years later, the family moved to Canada. Throughout his schooling, no one had ever presented him with the idea of becoming a banker, nor had it ever crossed his mind.
After graduating from the University of Winnipeg with a BA in political science, he moved back to Europe to study for an MA in international affairs and history at The Graduate Institute of International and Development Studies in Geneva. The institute shared a campus with the UN High Commission for Refugees. “That seemed like an appealing career to me, working with refugees under the auspices of the UN. I still think that’s the kind of thing one ought to aspire to do, but banking has captured my attention and drawn me in,” says Marshall, who was recently appointed the new chairman of the UK’s Financial Services Compensation Scheme (FSCS).
It was while studying in Geneva that Marshall met some bankers with strong beliefs about the value of their contribution to society, and it was this that appealed to him. Speaking to those bankers, he realised that it was important for financial services practitioners to look at the world through a historical lens to understand how history might repeat itself.
After completing his MA, Marshall worked in Geneva for a couple of years until his work permit ran out. He moved back to Canada without a place to live or a job, but quickly found himself working in the international trading division of Swiss bank UBS in Toronto. Since then, he has climbed the ranks to hold senior positions at RBC Capital Markets (as head of EMEA and Asia for Global Financial Institutions) and State Street Global Markets (as chief operating officer for the UK and EMEA).
While only mid-way through his career, he has already been awarded an OBE for his services to the financial sector and to charity
After a successful executive career, he has built an impressive non-executive portfolio, which has included a stint as the president of the ACI Financial Markets Association and a number of board directorships with companies such as CIBC Capital Markets, where he is chairman of the board. And while only mid-way through his career, he has already been awarded an OBE for his services to the financial sector and to charity – an honour announced in June 2018.
Ask about his career highlights and he talks not about the roles and accolades, but about the people and the bigger purpose of banking. He is particularly proud of spotting and encouraging talented individuals to progress in their careers when, ordinarily, they might not have because they were women in a male-dominated sector, for example. He continues to seek opportunities to mentor promising people via the organisations he works with on a voluntary basis, such as the East End Community Foundation, of which he is a trustee.
He is also proud of the various reform initiatives he has worked on. At the ACI Financial Markets Association, for example, he led the drive for education about, and endorsement of, ethical conduct in wholesale financial markets.
His work on reforms allows him to stay focused on the central purpose of financial services. “It often occurs to me that the reason money gets traded between currencies is to facilitate trade and business and commerce and travel and so forth, and that’s what this is all about,” he says. “It’s not about trying to return as high a return on capital as you can for the shareholder – ultimately, businesses are about that – but banking is also about the greater economy and the greater good.”
Joining the FSCS
In March 2018, Marshall arrived at 15 St Botolph Street in London to take up the chairmanship of the FSCS. Often referred to as the ‘lifeboat fund’, the FSCS has a mission to provide for people to receive compensation when harm has come upon them through bad financial advice or other kinds of malfeasance, and where the firms in question are unable to pay those claims.
The FSCS is funded by a levy on authorised financial services firms. Since becoming operational in 2001, it has helped more than 4.5 million people and paid out more than £26bn.
Evidence suggests consumers are more likely to engage with financial services organisations if they know the FSCS is there to fall back on if something goes wrong. According to a 2017 FSCS survey of 2,038 consumers, 82% of respondents feel reassured knowing the FSCS exists and 62% trust banks and building societies, knowing the FSCS would protect them if those firms failed.
"My initial assessment of the FSCS is that things are running really well"
Since taking up the chairmanship, Marshall has been extremely impressed with the motivation, dedication and level of commitment and skill demonstrated by all FSCS staff. “My initial assessment of the FSCS is that things are running really well, but all organisations are on a continuum of learning and self-improvement and need to adjust as the environment around them adjusts,” he says
In December 2016, the FCA launched a review into how the FSCS is funded. A number of issues came under the spotlight, including how to reduce the volatility and unpredictability of levies and whether a risk-based levy would better reflect the risk a firm poses to the FSCS. The FCA is expected to issue its Handbook Notice on the new funding regime in the second quarter of 2019.
A thorny issue
The levy is, effectively, a tax on the majority for the misdemeanours of the minority. “The levy payers are ultimately businesses that could use the levy they pay to us in other ways, but luckily the vast majority of them understand fully that paying the levy benefits everybody and, therefore, it’s the kind of thing that we ought to contribute to,” Marshall says.
“For example, the banks who pay for deposit insurance have seen the downside of the banking crisis and the way in which banks disappeared through some difficult and fast-moving times during the global financial crisis. I’ve yet to meet a banker who feels that having to pay for deposit insurance is unfair or unjust.”
In the advice world, while the majority of firms want to do the right thing, there is a tension between those that create a product and those that sell and advise on it. There isn’t an easy answer to the ‘polluter pays’ construct, says Marshall. In the final rules of its funding review, the FCA is requiring product providers to contribute 25% of the compensation costs that fall to intermediaries. Marshall would like the advice sector to sit down with the FSCS and the regulators to work through some of its difficulties, but, in the meantime, he is calling on the firms in question to understand that the FSCS provides value to them in a way that is efficient and sensitive to their particular challenges.
"There isn’t an easy answer to the ‘polluter pays’ construct"
“We will never get to a place where we have no malfeasance being tried somewhere and I don’t believe that anybody would want to live in a society where we have a lot of vulnerable people suffering because of these bad advisers. We simply have to do it,” he says. “The police force is funded for the same reason. The FSCS is doing its best to keep those levies to a minimum.”
Beyond implementing the results of the FCA’s funding review, Marshall wants the FSCS to review its systems and architecture continuously to ensure it is fit for purpose. Investment in its claims-handling platform and online portal has seen customer satisfaction rise to 83%, and is expected to reduce claims-handling costs by £2m by the end of 2017/18. In a further development, the FSCS has appointed a sole partner, Capita, to provide its claims handling service. It says the move will offer a better deal to claimants and stakeholders.
If focusing on operational efficiency feels a bit like tinkering at the edges, Marshall does have a new focus for the FSCS – to use its experiences and insights better so as to support oversight and reform of those parts of the sector where people are giving bad advice to the vulnerable. As one example, he points to the potential for misselling pensions products to those who can now access their entire retirement pot under new rules on pension freedoms.
“A big role that the FSCS can play here is to work with regulators and the sector to understand how these things arise so that preventative measures can be put in place to really protect these members of society from receiving bad advice and making bad decisions,” says Marshall.
Raising awarenessMarshall's CV
Jun 2018: Awarded an OBE for services to the financial sector and to charity
Mar 2018: Appointed chairman of the Financial Services Compensation Scheme
Jan 2014: Begins building a non-executive director portfolio, which includes positions with the National Bank of Jeddah, CIBC Capital Markets, Chubb Europe, CFA UK and UK Financial Investments
Mar 2014: Takes up the presidency of the ACI Financial Markets Association
Mar 2011: Joins State Street Global Markets as chief operating officer of UK and EMEA
Jan 1993: Joins RBC Capital Markets; works way up to head of EMEA and Asia, Global Financial Institutions
Mar 1991: Joins UBS in Toronto, Canada as FX and fixed income trader, following a stint at AMAS Bank in Geneva
One thing the FSCS could do to help vulnerable consumers is to make it clearer that they can help themselves, cost-free, through the FSCS and that it will do its best to make its services accessible to them.
In September 2017, the FSCS reached an agreement with the Building Societies Association and UK Finance on how their members will use the FSCS badge across a range of channels, including websites, mobile apps and advertising campaigns. The agreement builds on disclosure requirements set by the Prudential Regulation Authority, which requires all authorised banks, building societies and credit unions to inform new and existing customers that the FSCS protects their deposits – by displaying FSCS-branded stickers and posters in branches and sharing the FSCS’s information leaflet.
The FSCS has also set up a life and pensions working group, made up of some of the biggest providers in the UK, to emulate the agreement reached with deposit takers. This follows mystery shopper research by the FSCS, which finds that nearly two-thirds of clients had to prompt their adviser for information about the FSCS. “So far, the working group is heading in the right direction, with levels of engagement very high,” says Marshall. “However, we are at the very early stages of this long-term project.”
Despite the challenges that ‘bad apples’ in the sector pose, Marshall believes that, collectively, financial services have made tremendous strides over the long term. “When I think of the historical studies done on how it was then and how it is now, everybody is better off,” he says. “We’ve got lending, access to capital and lots of good educational programmes that we wouldn’t have had 50 years ago. I’m confident that if we keep trying to improve on these matters, and we all work together, we’ll get there.”
The full version of this article appears in the Q3 2018 print edition of The Review. All members, excluding student members, are eligible to receive the quarterly print edition of the magazine. Members can opt in to receive the print edition by logging in to MyCISI, clicking on My account, then clicking the Communications tab and selecting ‘Yes’.
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