The FSA's consumer panel has warned the regulator it is relying too heavily on consumer education to police stakeholder and is unconvinced of its effectiveness in the short term.
The Financial Services Consumer Panel is being supported by financial education charity the Money Management Council, whose recent study in conjunction with the Citizens Advice Bureau shows critically low financial knowledge among consumers.
The panel's views were published in the FSA's policy statement on feedback to consultation paper 61 on decision trees, published last week.
The FSA responded to the panel's concerns by insisting its rules provide an appropriate regime to inform and protect consumers which, it argues, does not place undue burden on the industry and independent advisers.
The MMC interviewed consumers across a spectrum of ages and social groups which showed that a high proportion are apathetic, easily bored or fearful when it comes to personal finances. The MMC is due to make a presentation on its research to the FSA next week.
MMC president Marie Jennings says: “This is a wake-up call for the industry and consumers. If we do not know what we are buying and do not understand how to make choices, no regulatory system has a chance of being as effective as it could be.”