Investment industry professionals have delivered a mixed response to a Financial Conduct Authority call for input to improve the retail investment market with some worrying that it will represent another consultation with little action taken at the end of the process.
The call for input on the consumer investments market, which was published on Tuesday morning, covers mass market versus high-risk investments, advice versus guidance, consumer compensation, scam presentation and tech innovation. It is open to feedback until 15 December.
In a press release announcing the consultation, the FCA said too many consumers were receiving lower returns than they should because of “unsuitable products with high fees”.
“The consumer investment market is not working as well as it should,” said interim FCA chief executive Christopher Woolard. “There have been too many scams and scandals and too often consumers are offered unsuitable products or advice. As a result, many consumers lack confidence in the investment market.”
‘I am concerned that once again the FCA is wasting time consulting’
Quilter corporate affairs director Jane Goodland said the “no-nonsense” tone to the call for input was encouraging, while Aegon pensions director Steven Cameron said the “extremely” wide-ranging document brought back memories of the financial advice market review (FAMR). “There’s likely to be something here that every adviser firm across the UK will have an interest in,” said Cameron.
But others were less optimistic about whether the consultation would bring about change.
“I am concerned that once again the FCA is wasting time consulting,” said CWC Research director Clive Waller.”The prices issue goes back at least eight years. The FSA [the FCA’s predecessor] started looking at risk in 2011 and there is much regulation on this. They should have enough expertise and information, come up with proposals and act, after listening to any legitimate objections.”
SCM Direct co-founder Gina Miller (pictured) is worried about the FCA’s track record on acting on stakeholder input on consultations.
“What would give me confidence is if there is a cultural change under the new CEO Nikhil Rathi that sees the core FCA principle of treating customers fairly result in vastly improved consumer protection and a better functioning industry, resulting in increased consumer confidence and trust,” Miller said.
Candid Financial Advice director Justin Modray also has his fingers crossed. “I’m not holding my breath, but really hope the recent change in leadership will make a difference.”
Rathi was announced as Andrew Bailey’s successor in June and will begin in the role this autumn.
See also: Questions raised over whether new FCA boss has the chops to repair trust in the regulator
What does the industry want to see prioritised?
Modray reckons the most positive impact the FCA could make from its latest work is to be more proactive at nipping mis-selling scandals in the bud. “Its track record of failing to do so causes severe detriment to both consumers and our industry, with the good guys left to pick up the ever increasing FSCS tabs.”
Aegon’s Cameron also spoke in favour of a “polluter pays” system. “At the heart of this, we need to make sure the vast majority of highly professional financial advice firms aren’t burdened with ever increasing FSCS levies or professional indemnity premiums.”
Miller is currently worried about the FCA, Prudential Regulation Authority and the Bank of England rushing through a consultation on how complaints against them are handled. It could limit the scope of investigations and cap compensation at £10,000.
As a priority, Miller would like to see the complaints consultation suspended until independent investigations into HBOS Reading, London Capital & Finance and Connaught have been published.
She is also concerned about two other areas in particular. First, that companies can become appointed representatives and join the FCA register without ever being properly vetted by the regulator.
Second, she said that gaps in regulation allow the FCA “wriggle out” of responsibility for boiler room scams because they involved unregulated firms.
The FCA said in the call for input that the advice industry is dominated by small firms that sometimes provide products and services beyond its remit therefore making it easy for bad actors to “hide” and creating oversight challenges. There are over 5,000 financial adviser firms and more than 27,000 individual advisers in the UK, the FCA said.
