FSA says KFIs are too long and complex
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The FSA has criticised the industry for using what it says are lengthy and complex key features illustrations which confuse consumers.
In an interview with Money Marketing, following the publication of the FSA’s policy statement on product disclosure rules, head of investment policy Peter Smith (pictured) says firms are only focusing on their regulatory liability rather than looking to offer clarity to clients.
The statement, published this week, outlines that KFIs relating to advised pension business from December 31, 2012 onwards will need to show the separate effect of product charges and adviser charges.
The effect-of-charges table within the KFI will have to include an additional column to show the accumulated fund if there were no charges. KFIs will also need to show whether any adviser charge is deducted before or after investment into the product.
Smith says: “Documents of this sort have a tendency to grow and become more anodyne and less useful to consumers and it is a challenge for us to keep on top of that and keep the pressure on the industry. It is the nature of these documents that rather than focusing on how the consumer gets useful information out of them, instead, the focus is on how firms can make it abundantly clear where their liability stops.”
Axxis Financial Planning director Owen Wintersgill says: “It is inevitable that firms will look to indemnify themselves against complaints but KFIs are too long and need revising.”
The FSA has also delayed final rules on Sipp disclosure requirements after the industry expressed concerns about the huge costs of the proposals. The regulator published a consultation paper in February calling for providers to supply illustrations and projections for all investments held within a personal pension scheme other than commercial property, commodity investments, synthetic exchange-traded funds and shares. The FSA will consult again on revised rules.
Suffolk Life head of marketing Greg Kingston says: “If you are having to continually issue different illustrations if the investment strategy has changed or asset types have changed, the investor is not going to get any value out of the illustration.”
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Readers' comments (45)
hugh jeego | 11 Nov 2011 8:49 am
Who`s fault is it if we are "focussing on regulatory liability" then? The client? The intermediary? or perhaps, just perhaps a bunch of overpaid untouchable idiots in Canary Wharf. I just wish in some twisted way that they regulated themselves what a self perpetuating machine that would be!
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Anonymous | 11 Nov 2011 8:49 am
I wonder why they are so long and complex?
Maybe because we live in a litigatious society and one where the FSA supports the consumer if something wasn't covered in the product literature?
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Ian Green | 11 Nov 2011 8:52 am
"KFIs are too long and complex"?
[SOUND OF PALM SLAPPING FOREHEAD]
If ONLY I'd thought of that YEARS ago.
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Tony | 11 Nov 2011 8:55 am
I imagine what he really wants in a statement in huge letters saying "GO TO YOUR BANK"
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Anonymous | 11 Nov 2011 8:55 am
Yet another example of the FSA having no idea of what they want. They set the requirements of what is needed and now they claim client getting to much info. The RWLs now of client letters are huge with what has to be included FSA will some complain we put in far to much info
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Derek Bradley ceo PanaceaIFA | 11 Nov 2011 8:57 am
"It is the nature of these documents that rather than focusing on how the consumer gets useful information out of them, instead, the focus is on how firms can make it abundantly clear where their liability stops.”
Peter Smith is correct and we can only hope that the FSA is looking at this issue from within too.
This message seems to dovetail with the recently issued CP11/21 which states “we wish our definitions to be straightforward and unambiguous, without undue complexity, and would welcome views from the industry”.
The Abilene Paradox springs to mind where people can make decisions based not on what they actually want to do, but on what they think that other people want to do, with the result that everybody decides to do something that nobody really wants to do, but only what they thought that everybody else wanted to do.
The RDR in a nutshell!
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Andy | 11 Nov 2011 9:02 am
The mirror the FSA....too long and complex
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Joe Egerton - Justice in Financial Services | 11 Nov 2011 9:04 am
The FSA is entirely right. Often forms used to collect data for KYC are also too long and complex. And suitability reports seldom are brief, concise and too the point. But who, we might ask, has brought about this prolix incomprehensibility? Which organisation has demanded that more and more be covered? Wild horses would not drag from me the name of an organisation headed by a certain Hector Sants.
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Ned Naylor | 11 Nov 2011 9:08 am
You couldn't really make this up !
These people, supposedly in the interests of the consumer insisted on voluminous information being incorporated into the KFIs in the first place.
Daft, Daft and Dafter appears to running the FSA now.
What with the ridiculously draconian and time challenged changes the RDR is putting into place and the likelihood that the unintended consequences of a commission ban is that investors will see higher fees and higher AMCs from successful fund managers as mooted in recent industry press articles, the whole pack of cards is about to collapse.
Tie this in with the incompetant Eurocrats and the doomed to failure Euro, we can look forward to even more doom and gloom over the next year or so.
Maybe the world as we know it will come to an end at the latter end of next year. It is certainly looking very probable.
Trouble is, what do we do when it does.?
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Anonymous | 11 Nov 2011 9:10 am
Just remind me who sets the rules on how these look?
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