The FCA has admitted its disclosure rules have failed the financial services industry and consumers, whilst warning that new European proposals could cause further problems.
Speaking at a fringe event at the Conservative party conference in Manchester last week, FCA director of enforcement Tracey McDermott admitted that its product disclosure rules had added unnecessary costs for firms and created complexity for consumers.
She said: “We are looking at how we can make regulation more effective. That means making more targeted interventions with the maximum impact for the minimum disruption.
“We need to work out how we distinguish between those interventions and those that add cost and complexity. One of those areas has been increased disclosure which has added cost to firms and created more complexity for consumers but has it really had the outcomes we want? No. What we are really trying to work out is where and how we should intervene.”
She said the FCA’s new approach to behavioural economics had changed its thinking. An FSA behavioural finance report, published earlier this year, suggested that providing too much information could lead to poor decision-making but this is the first time the regulator has publically admitted its disclosure failings and the damaging effect they have had on advisers and consumers.
Separately, the FCA has also criticised the scope of EU disclosure rules and packaged retail investment product regulations which will require a fresh Key Information Document.
Speaking at the Wealth Management Association conference in London this week, FCA chair John Griffith-Jones said: “On Prips we want disclosure on complex products which are hard to understand, but not necessarily on all individual share, bond and saving account transactions that meet different consumer objectives. This should also avoid distribution aspects and practices already covered in other directives such as Mifid II.”
Worldwide Financial Planning IFA Nick McBreen says: “McDermott is spot on. There is a tsunami of paper and information which consumers are inundated with and it serves no purpose.”